Minister Mboweni pays lip service to reform without

24 February 2021

While Finance Minister, Tito Mboweni, recognised the terrible human and economic suffering brought about by the Covid-19 pandemic in his speech, the budget he tabled looks set to deepen the suffering of the South African people.

From the outset, ActionSA recognises the promise of a 1% reduction in the Corporate Income tax rate in the next financial year, and the decision not to increase income tax or VAT. Despite kicking the tough budget decisions down the road, this is a positive recognition on the part of the Minister that only economic growth can generate more revenue sustainably to address our fiscal pressure.

However, the Minister, like President Ramaphosa earlier this month, paid lip service to economic reforms while avoiding the necessary commitments to generate investor confidence through real fiscal reform.

No significant budget cuts have been affected leaving our national debt-to-GDP ratio climbing to 88% in the outer years, increasing from R3.95 to R5.2 trillion in 2023/24. Minister Mboweni mocked the idea of austerity by falsely claiming that this budget would not be an austerity budget by avoiding cutting expenditure on education, social grants and other key areas of service. The increase in debt, pushing our country closer to a national debt trap, is a result of declining revenue against a failure to make the tough but necessary budget cuts to non-strategic areas.

Yesterday ActionSA revealed our plans to save R23 billion following our #CutTheFat campaign. These are realisable savings that could have been made if President Ramaphosa’s government had the political willpower to curb wasteful expenditure and political patronage. Clearly, this willpower is non-existent.

This budget speech, above all else, was the opportunity to demonstrate leadership. It needed to start with the President announcing cuts to his cabinet which would see the South African public paying less to assuage the political factions within the ANC. It further required management of the public wage bill to manage down the deficit, and it required the aggressive cuts to the non-essential expenditure within government. This would have been the austerity measures that would have demonstrated the kind of reforms that would generate investor confidence.

The failure to exact budget reforms has resulted in the Provinces receiving only an average 1% annual increase over the medium term, despite its critical management of education and healthcare. Local government receives only a 2.3% average annual increase. These sub-inflation increases demonstrate how the service delivery agenda of communities comes second to the national government’s largess. In the year of a local government election, this must be remembered as critical infrastructure continues to fall apart while ESKOM passes on double-digit increases to municipalities for the cost of electricity.

Of significance is the announcement of the 2 years of funding for the Covid-19 vaccination programme. This raises the question of whether the timeframe to vaccinate the South African public, as communicated by the Department of Health, has been incorrect. If this does in fact signify the vaccination programme running into 2023, then the continued suffering on South Africans and their livelihoods will continue. It would also demonstrate that the Department of Health has either knowingly or unknowingly deceived the country.

Knowing that the Minister would not have announced an increase in funding to political parties in his speech, our team of analysts will begin identifying if this increase has taken place and, if so, in what quantum. We reiterate our position that any increase in funding to political parties would be intolerable given the failure of this budget to demonstrate austerity measures.

ActionSA maintains that this budget needed to see the largest budget cuts in the history of our country and ensuring that this would fund immediate tax decreases across the income spectrum. This would ensure that more money was retained in South African households to be spent within the domestic economy. It would have immediately reduced the cost of doing business and afforded the private sector the space to employ more South Africans.

ActionSA remains resolute that South Africans can still have hope in their country, but that this hope cannot be believed to arise out of the ANC. The ability to get South Africa working will require South Africans, of all backgrounds, to At As One to consign the ANC to the opposition benches. This has to begin with the local government elections later this year.

Issued by Herman Mashaba, ActionSA President, 24 February 2021