COSATU is disappointed by Treasury’s lackluster Medium-Term Budget Policy Statement (MTBPS)

1 November 2023

Workers and the entire country looked forward to Government’s tabling a bold, decisive and progressive Medium-Term Budget Policy Statement (MTBPS) at Parliament today. Tragically, yet again, Treasury failed to rise to the occasion. Instead of tabling a bold MTBPS that would turn a tepid economy around, provide relief to the poor and rebuild the state; it chose to deliver an underwhelming accounting note with reckless cuts to budget allocations and below inflation increases to Departments pencilled in over the next three years. We will not emerge from our crises if we continue to stumble along a path of 0.9% and 1.4% GDP growth.

Our nation is facing a myriad of very difficult challenges, ranging from tepid economic growth, a 42.1% unemployment rate, a youth unemployment rate of 60%, endemic crime and corruption, a painful period of loadshedding, cable theft crippling our passenger and freight railway network, inefficient ports, dysfunctional municipalities, and ingrained poverty and inequality. All of these feed into a general sense of despair.

The Congress of South African Trade Unions (COSATU) has been dismayed by National Treasury’s decades long addiction to a variety of economic and fiscal policies that have not succeeded by any yard stick. We should not be surprised when these policies continue to fail to yield results by any rational person’s yardstick.

In 2020, Treasury imposed an ill-conceived wage freeze on public servants. Subsequently below inflation increases have been effected for public servants. Yet the fiscus and the economy remain in a crisis precisely because the real obstacles to growing the economy have not been addressed, e.g. ensuring affordable electricity, reliable rail and efficient ports. The nation has more recently been astounded by shortsighted attempts to impose misguided austerity budget cuts across government in the run up to the MTBPS, including freezing vacancies and infrastructure investment programmes.

Whilst we appreciate the real fiscal constraints facing the state and the need to cut fat and reprioritise expenditure, the solutions offered by Treasury of bluntly slashing expenditure and further decapacitating the state in an economy desperately in need of stimulus and well-oiled public services, will only serve to choke the economy and weaken already enfeebled public and municipal services. What is needed is to grow the economy. That is the only sober and sustainable path to pay down our worrying debt trajectory.

Treasury’s narrow fixation on cutting the wage bill is a lazy option that will not resolve the multiplicity of crises the country is facing. Underpaying a nurse will not get the trains to run on time. What it will do is to fuel the brain drain of skilled public servants to better paying and less stressful jobs overseas. We should not fall for a reckless narrative that says the public service is bloated. In 1994 we had 1 million public servants for 34 million South Africans. Today we have 1.2 million public servants, yet the population has nearly doubled at 62 million.

The crisis we are facing is not an expenditure crisis. The wage bill has been stable for more than a decade. The MTBPs exposes the myth of an out-of-control wage bill by its admission that austerity budget cuts have reduced the wage bill component of the budget from 35% to 31%! The crisis is a collapse in company tax. This is because of the rapid deterioration in the capacity of Transnet to transport mining, manufacturing and agricultural products to their markets timeously. The mining industry is a major contributor to the state through company taxes and an earner of investment and foreign exchange for the economy.

Whilst being dismayed by the austerity thrust of the MTBPS, we welcome additional allocations to critical frontline services, e.g. Home Affairs (R1.3 billion), SAPS (R3 bn), SARS (R1bn), Justice (R2bn), infrastructure projects which will receive a positive 10% increase and the projected investment in Transnet of R123bn over the Medium Term Expenditure Framework.

The Federation is however pained by reckless cuts in the MTBPS to NSFAS (R3bn), Health (R1.6bn), Social Security (R2bn), Human Settlements (R3bn), Transport (R1.2bn), Water and Sanitation (R900 million), Trade and Industrial financing (R290m), Land Reform and Emerging Farmers Support (R500m) and a whopping 6.5% cut to Home Affairs. These cuts will further weaken the state’s capacity to deliver quality public services.

We are deeply concerned by below inflation increases to key frontline services over the MTEF, in particular Health, Basic Education, NSFAS, Defence, Trade and Industry, and SASSA. Most alarming of all is the end in funding for the SRD Grant in 2025 and a budgeted decrease in the SAPS’ already dangerously dwindling personnel numbers.

If government does not turn things around at Transnet fast, we will face a jobs bloodbath in the mining industry and a crisis of revenue that no amount of pickpocketing public servants will fix. If we are to grow the economy and reduce unemployment, and thus increase the revenue the state needs to reduce debt, then government needs to deal with the real obstacles suffocating the economy, workers and businesses. The Finance Minister needs to signal a shift from Treasury’s tried and tired macro-economic policies and table an aggressive Budget at Parliament that will protect the poor, rebuild the state and grow the economy, in particular to:

Provide additional support to Eskom, which is beginning to turn the corner and has made considerable progress, to end loadshedding and ensure reliable and affordable electricity.

Urgently intervene at Transnet and Metro Rail to secure and rebuild our freight and passenger railway network and modernise our ports. Transnet has to be the state’s number one priority. The lack of clear plans in the MTBPS to support these two critical SOEs is alarming.

Stabilise and overhaul dysfunctional municipalities and restore basic services. The debt relief provided for various municipalities is positive but needs to be accompanied by capacity building interventions.

Allocate additional resources to the South African Revenue Service to tackle tax and customs evasion, conduct lifestyle audits of the wealthy, and generate badly needed state revenue. SARS has proven itself to be remarkably efficient and needs to be given further funding to increase tax compliance from 64% to 70% over the next two years. This would generate an additional R120 billion in state revenue.

Fill critical frontline vacancies in the public service, especially the Police, National Prosecuting Authority and Courts, enabling them to crack down on crime and corruption.

Give relief to commuters and the economy by reducing the taxes consuming 28% of the fuel price and place the chaotic Road Accident Fund under administration to lessen its need for fuel levy hikes.

Expand the Presidential Employment Programme to accommodate 2 million active participants by February’s Budget to help young people earn a salary, gain experience and enter the labour market.

Enhance the invaluable Social Relief of Distress Grant to recover value lost to inflationary erosion by raising it to the Food Poverty Line and link it recipients to skills and job opportunities.

Expedite and not freeze badly needed infrastructure investments.

Ensure the two pot pension reforms are implemented in 2024 and increase the immediate relief to R50 000 for indebted workers, providing relief for millions and injecting badly needed stimulus into the economy.

If government can show the necessary fortitude and vision, and implement these common-sense interventions, the economy can meet the 4% growth target. This will set the nation on the path to a prosperous job creating economy, a capacitated developmental state and ensure the fiscus is set back on a secure path.

Cutting medication to a patient in the ICU at hospital will achieve little besides killing the patient. Workers can no longer afford to live on hope and prayers, whilst Treasury experiments with failed economic theories that have been rejected across the world. COSATU will continue engaging the leadership of government to seek a more pragmatic and sustainable path to rebuilding the state, growing the economy and creating jobs.

Issued by Matthew Parks, Acting National Spokesperson & Parliamentary Coordinator, COSATU, 1 November 2023