If we can’t get the politics right, we can’t get the economics right

4 August 2015

The Rates and Monetary Amounts and Amendment of Revenue Bill will be a test of the Minister of Higher Education, Dr Blade Nzimande’s courage. 

What we do know is that he does not have the courage to contest an election alone in South Africa. 

But, what we don’t know is whether he has the courage to oppose this Bill?

Because, the Rates and Monetary Amounts and Amendment of Revenue Bill will raise the cost of a bottle of whisky by R3.77, which, if what we hear is true, will cause a significant dent in the Minister’s disposable income.

The Minister of Finance, Nhlanhla Nene, reportedly warned that the economy was in deep trouble and that low levels of economic growth and high levels of unemployment were the “new normal”.

The economy is unlikely to grow at more than two percent this year and 7.6 million people, who would like a job, but cannot find a job, or would like a job, but have given up looking for a job, are unemployed.

That means 7.6 million people live without dignity, live without independence, and live without freedom, in South Africa.

Under President Jacob Zuma the national debt has spiraled from R500 billion in 2008 to R1.6 trillion in 2015, and is expected to rise to R2.2 trillion in 2017.

The debt-service cost remains the fastest growing component of expenditure. We will spend R126.4 billion – yes, that is R126.4 billion - on servicing the national debt in the 2015/16 Financial Year.

We are now spending, staggeringly, more on servicing the national debt than we are spending on defence, or police, or the courts, or the prisons.

The Rates and Monetary Amounts and Amendment of Revenue Bill has therefore been introduced to provide revenue raising measures, including an increase in personal income tax by one percentage point for all taxpayers earning more than R181 900 and an 80.5 cent increase on fuel levies, which is aimed at raising a further R16.8 billion in the 2015/16 Financial Year, to ensure, we are told, the “sustainability of the public finances”.

However, the truth is that the public finances are unsustainable because of low economic growth, high public-sector wage settlements and mismanaged state-owned enterprises.

The Minister of Finance, Nhlanhla Nene, warned about the risk of a public-sector wage settlement significantly above inflation in his budget on 25 February 2015.

But, the National Executive responded with a collective middle finger and reached a public-sector wage agreement which will reportedly provide the average state employee with an 11.5 percent increase, and cost an additional R65.6 billion, between the 2015/16 Financial Year and the 2017/18 Financial Year.

We have to ensure that the public finances are sustainable by cutting wasteful expenditure, rooting out corruption, and dealing with failed state owned enterprises.

However, the fear is that that further tax increases can be expected, especially given the Davis Tax Commission report on the advantages of an increase in Value Added Tax.

Whatever the case we have to face the fact that the “root cause” of the economic problem is the political problem.

What we need is clear policy focused on economic growth and job creation. 

But, what we have is policy uncertainly caused by factionalism and division.

President Jacob Zuma tells us that the National Development Plan is the policy of government.

But, Deputy Minister of Public Works, Jeremy Cronin, tells us the National Development Plan is “more of a vision” which “consists of some useful insights and recommendations, intriguing but untested proposals, summaries of programmes long underway, and much else.”

What this illustrates is the biggest “binding constraint” on the economy is the ANC.

And that unless we get the politics right, we will never get the economics right.

That is why more-and-more young people who want jobs now understand that:

- you can have high rates of economic growth, or you can have an ANC government, but you can’t have both;

- you can have high levels of investment, or you can have an ANC government, but you can’t have both; and

- you can have high levels of employment, or you can have an ANC government, but you can’t have both.

And that is why more-and-more young people without jobs are choosing to vote for “freedom, fairness and opportunity”, in South Africa.

Statement issued by David Maynier MP, DA Shadow Minister of Finance, August 5 2015