MTBPS: South Africans ‘thrown under the plane’ to pay for SAA

28 October 2020

Two key things happened in today’s Medium Term Budget Policy Statement:

 President Cyril Ramaphosa and Finance Minister, Tito Mboweni, have retreated from their commitment to the “active scenario”, which lasted just 3 months.

Debt will not stabilise by 2023. In fact, it will continue to balloon to a massive 95% of GDP and will now only stabilise in 2025/26, with an extra R1 trillion in additional debt.

 The ANC government has chosen to cut essential services to the public – like education and policing – to fund another bailout of South African Airway (SAA). This is an indefensible, immoral choice. It amounts to throwing South Africans ‘under the plane’ to pay for SAA.

In summary, the Minister has abandoned his commitment to get debt under control by 2023. And he has abandoned his commitment to stop bailouts of SAA.

South Africans will continue to pay for a zombie state company, and will continue to suffer the consequences of ever-higher debt.

That is why today’s Medium Term Budget Speech must be considered a failure.

SAA:

The granting of another R10.5 billion bailout to SAA, on top of R16.4 billion allocated in February’s main budget, shows the ANC’s disregard for poor South Africans.

Minister Mboweni should have held the line and refused this bailout.

He has made this an issue of principle in the past, and has repeatedly committed that no more public money would be wasted on SAA. But he has now capitulated, has broken that promise, and must now reconsider his position in Cabinet.

This new bailout to SAA is funded by (among others):

Cutting the policing budget by R1.2 billion;

Cutting the education budget by R1.4 billion;

Cutting the budget for the courts and the prosecuting authority by R1.2 billion; and

Cutting conditional grants to provinces and local governments, for things like new schools and health services, by R12 billion.

This is the immoral choice the ANC is making. They are choosing SAA over fighting crime. SAA over education. SAA over South Africa.

In contrast, this R10.5 billion could have paid for:

One month of additional TERS support for families who have lost income during lockdown;

440 new community clinics;

66 500 new RDP houses;

130 new schools; and

80 000 new teaching degrees, or 27 000 new medical graduates.

We will continue to mobilise against this bailout, and call on the public to take part in the budget process to make their voice heard in opposition to this.

Debt - The end of the “active scenario”:

The Minister’s “active scenario” died after just 3 months. The targets he committed to in July he has now retreated from. Debt will not stabilise in 2023, and will not stabilise at 87% of GDP. Instead, debt is now only targeted to stabilise in 2025/26,  and then only after ballooning to 95% of GDP. That means an extra R1 trillion in new debt!

The consequence of this retreat from the “active scenario” is that we will spend R271 billion on paying interest on our debt over the next year. We will now spend 21 cents in every rand of tax revenue on paying interest.

This means we will spend more on interest costs (R271 billion), than on:

Police – R104.7 billion

Healthcare – R231.3 billion

And because of the ballooning debt, interest costs will even overtake social grants in 2023.

This budget has undermined the credibility of the Finance Minister and the National Treasury. This credibility is further undermined when new commitments are made that are also unlikely to ever be achieved.

South Africans will continue to pay for a failing SOE, and will continue to suffer the consequences of higher debt.

That is why today’s Medium Term Budget Speech fell far short of expectations.

Issued byGeordin Hill-Lewis,DA Shadow Minister of Finance, 28 October 2020