National Treasury commits to working with DA to introduce fiscal anchors
20 March 2024
Today the Standing Committee on Finance (SCOF) deliberated on the public submission from National Treasury to the DA’s Responsible Spending Private Member’s Bill.
Treasury broadly supported the spirit and intention in which the Bill was introduced. It welcomed the Bill as an important step and significant contribution towards stabilising debt and government spending. If passed, the Bill will protect the most vulnerable in our society by containing the unsustainable accrual of public debt and excessive deficit spending.
A government, like any entity, must operate within its means. When a government consistently spends more than it earns in revenue, a budget deficit forms. To secure the funds necessary to fund this expenditure, the ANC has resorted to excessive deficit financing via increased debt issuance, the funds of which were not channelled to infrastructure development or service delivery. Instead, it was used to sustain salary increases of the ANC’s cadre millionaire managers who add little to no value to the sector.
Over time this unchecked cycle of spending and borrowing has pushed our public finances to a crisis point. Our public debt burden has surged from just 27% of GDP in 2008 to 72.2% (R5.207 trillion) in 2024/25 as per the February National Budget. The Budget revised the debt stabilisation target to 75.3% of GDP by the fiscal year 2025/26.
The cost associated with servicing the increasing debt stockpile has been the fastest-growing item on the Budget and continues to occupy an increasing share of GDP and revenue. As a result, debt-service costs have risen from R307.2 billion to R356 billion in the span of a year. This means that we pay nearly R1 billion per day to service debt that has little to no positive impact on the living standards of vulnerable South Africans who are battling a government-induced cost-of-living crisis.
In anticipation of the fiscal crisis that currently besets our economy, the DA presented a proactive solution in the form of our Responsible Spending Bill. The Bill will introduce a fiscal rule to act as a guide towards more responsible spending. It will stabilize our fiscal environment and encourage a forward-thinking approach to budget planning.
The Responsible Spending Bill will introduce a strategic shift in fiscal policy by integrating a debt rule into the existing expenditure framework. This approach is designed to reinforce fiscal discipline by setting sustainable limits on government debt and expenditure. It will in this manner ensure that spending decisions align better with long-term economic stability and growth objectives.
Treasury committed itself to engage meaningfully in a consultative process in developing and implementing fiscal anchor. The DA values and appreciates this commitment, and we emphasise our readiness to always embrace constructive feedback. We remain dedicated to collaborating with the Treasury to devise a strategy that promotes the well-being of all South Africans.
It is therefore unfortunate that COSATU, once again, attempted to frame the Bill as an attack on frontline workers and in doing so politicise the debate around unsustainable debt. The union's criticism highlights the disparity in private sector wages, which is indeed troubling. However, their failure to address the more pronounced wage disparity in the public sector is alarming. This bill aims to rectify the situation by eliminating excessive salaries at the top echelons of the public sector.
Contrary to COSATU's portrayal, the Bill is designed to safeguard frontline workers. It explicitly avoids any across-the-board salary freezes or cuts. Such measures would be counterproductive and detrimental to essential personnel. Instead, the Bill is precisely formulated to exempt Occupation Specific Dispensation (OSD) workers from any fiscal adjustments.
The DA has, in fact, committed to protect CPI linked increases for frontline workers such as nurses, teachers, social workers, and police officers among others. Instead, the focus of the Bill is on eliminating wasteful expenditure by cutting the salaries of 'millionaire managers' who do not provide specialist services and are outside the OSD framework.
The DA urges all Committee members to recognize the constructive stance of the National Treasury and support the Responsible Spending Bill. Since the Responsible Spending Bill is the only proposal on the table, voting against it will be to vote against the future best interest of all South Africans.
Issued by Dion George, DA Shadow Minister of Finance, 20 March 2024
