Initial response to the Medium-Term Budget Policy Statement

1 November 2023

The Medium-Term Budget Policy Statement the Minister of Finance Enoch Godongwana delivered to the parliament today is about formalising the enforcement of a new round of budget cuts except for some minor adjustments. This follows the 30 August widely circulated leaked letter from the National Treasury imposing austerity measures on national government departments, public entities, and provincial governments.

Implemented under the notion of fiscal consolidation, the cuts affect the government’s total expenditure less debt-service costs called non-interest spending. These include net cuts of R37.3 billion and R47.7 billion in 2024/2025 and 2025/2026 financial years, respectively.

This financial year, 2023/2024, the cut amounts to R21.7 billion.

This financial year, the medium-term expenditure framework cuts municipal and provincial conditional grants by R3.4 billion and R6.2 billion respectively. The best approach, as opposed to the cuts, is to enhance governance and administrative capacity and technical expertise for municipalities and provinces to deliver and maintain infrastructure and other essential services and serve the people diligently.

The budget cuts will suppress and negatively affect growth as we shall highlight.

Through neoliberal reforms, the medium-term fiscal policy prioritises asserting economic domination by profit-driven private interests at the expense of ensuring state-led investment, development and public participation in the economy. This is embedded, among others, in using public power to impose microeconomic liberalisation and insinuate competition by profit-driven interests in critical network and other infrastructure, such as power generation, water, rail, ports and telecommunication.

While asserting that this is the age of advanced industrial revolution, including technological inventions, the Medium-Term Expenditure Framework cuts the average annual growth for innovation, science and technology by 1.6 per cent up to the 2026/2027 financial year.

The framework intransigently maintains the blended finance model involving investment “de-risking” beneficial to profit-driven finance capital. Experience from other jurisdictions warns that this is a high cost, low yield option for the public.

While acknowledging the importance of higher growth as essential, there is little, if any, in the Medium-Term Expenditure Framework that advances structural transformation and enhances productive capacity to achieve it. The average annual growth expenditure for economic development, particularly industrialisation and exports, is less than 1 per cent for the entire term from the 2023/2024 to 2026/2027 financial years. In contradiction, South Africa needs an adequately funded high impact employment creation industrial policy with domestic minerals beneficiation and manufacturing expansion and diversification as key anchors.

The minister conceded that growth will remain stagnantly low. In 2023, it will be an estimated 0.8 per cent. Thereafter, it will average 1.4 per cent up to the 2026/2027 financial year. These figures may as well be optimistic, given the experience of the downward revision of the estimated growth rates that the minister presented enthusiastically in February when delivering the budget.

In addition, the figures do not refer to inclusive or shared growth since, among others, the measures in the Medium-Term Expenditure Framework and the prevailing tax regime favour profit-driven domination of the economy, including of the lion’s share of income from production and trade. The stagnation means that the multiple crises of high levels of unemployment, poverty and inequality will persist throughout the entire Medium-Term Expenditure Framework outlined today.

While the SACP welcomes the extension of the Social Relief of Distress Grant, we denounce the bureaucratic procedures adopted to reduce the number of beneficiaries eligible for the grant. The curtailment of this disparately needed grant is part of austerity.

Now the number of beneficiaries eligible for the Social Relief of Distress Grant is and will continue to be lower than just after it was introduced amid the height of the COVID-19 pandemic in 2020. The government must stop curtailing the grant. It must instead prioritise expanding it to more beneficiaries amid the ongoing crisis of high levels of inequality, poverty unemployment—which affects approximately 12 million active and discouraged work-seekers.

The SACP will strengthen its efforts and capacity to dislodge the neoliberal stranglehold on our economic policy space and to strive for structural economic transformation and a review of macroeconomic policy. These efforts include forging a popular left front, building a powerful, socialist movement of the workers and poor, and intensifying the struggle against austerity and all forms of state capture, including neoliberal state policy capture.  

The SACP will conduct a further analysis of the Medium-Term Expenditure Framework and fiscal policy to enhance its response, most importantly through practical political action and campaigning.

Issued by Alex Mohubetswane Mashilo, National Spokesperson, SACP, 1 November 2023