SAFTU condemns Zuma’s austerity plan

28 November 2017

“President Jacob Zuma wants a committee to show him progress this week on plans to cut government spending by R25bn and raise taxes by up to R15bn, following the latest ratings downgrade to junk status by Standard & Poor’s on Friday.”

This opening paragraph in a report by Fin24 sums up just how hollow Jacob Zuma’s talk about ‘radical economic transformation’ really is. There could not be a less radical and less transformative solution to the country’s economic crisis, than the massive public spending cuts and tax increases which he is demanding from the Treasury.

In the view of the South African Federation of Trade Unions, these are the standard medicines which right-wing governments prescribe for the working class to force them to pay the price for a crisis of a monopoly capitalist system and a government which which has collaborated with that class. 

It is the capitalists and the government who are responsible for the crisis which has led to ratings agencies Fitch and S&P downgrading the country’s foreign and local rating to junk status, with Moody’s likely to follow, but, as SAFTU has already said, the consequences for the poor majority of South Africans will be appalling.

There is now a R40 billion ‘fiscal gap’, which economists define as “the difference between the present value of all of government's projected financial obligations, including future expenditures, and servicing outstanding official state debt, and the present value of all projected future tax and other receipts, including income accruing from the government's current ownership of financial assets”.

In simple terms that means the difference between what the government plans to spend and what it expects to collect in revenue, which has now suddenly gown much wider. 

Bridging this ‘fiscal gap’ in the way Zuma is proposing will make the budget cuts already foreshadowed by Finance Minister Malusi Gigaba, even bigger and make the tax increases even greater. 

The tax rises will hit the poor directly through PAYE deductions and any increase in VAT, which we all pay every time we buy something, but also indirectly by giving capitalist businesses a reason for not investing and creating jobs.

SAFTU has already accused Zuma of “robbing Peter to pay Paul” to fund his proposal for free tertiary education for families on annual incomes of less than R300,000, which is estimated to going to cost R40bn. ’Peter’ is going to be robbed of R25bn previously budgeted for school building programmes, municipal infrastructure, passenger rail transport and provincial roads, with the remaining R15 to come from higher taxes. 

His new statement makes it highly improbable that he was ever serious about this promise and that ‘Paul’ will ever see his R40bn. Even if it went ahead, because of the R25bn cuts, students, as well as workers and the South Africans as a whole, will suffer from worse service delivery, more lob losses, more delays in implementing the national health insurance system, and deeper poverty and hunger.

Zuma, the ANC and successive governments, particularly the Finance Ministers and the Treasury, are now confronting the inevitable consequences of years of bending to the will of the capitalist class and their enforcers, the credit ratings agencies. It is reported that they knew about this latest budget plan before it was announced to the people of South Africa

GEAR, the National Development Plan and a succession of austerity budgets, have all consolidated the power of monopoly capitalists, strengthened their and made us the most unequal society in the world.

Unemployment, at 36.85% by the more accurate definition, is six times the world average, more than a quarter of the  population are hungry every day and half of all South Africans do not have sufficient access to enough food to meet basic health needs.

But what has turned this economic crisis into a nightmare and led to the timing of the downgrades is the corruption and looting of the country, and the political instability this has caused. 

This has been led by the ANC leaders who were elected with a mandate to follow the route promised in the Freedom Charter to build a free and equal society which belongs to all who live within it. 

But instead they have betrayed those who voted for them and used their power to enrich themselves, their families, their cronies and a family of ruthless crooks, in alliance with executives of state-owned enterprises and state officials, to steal billions of rands from the people.

This in turn led to civil war with the ANC and its alliance partners which has created the political instability which the ratings agencies now use as the justification for downgrading the economy to junk status, with all its severe consequences for the majority of South Africans.

The biggest tragedy is that this need never have happened. South Africa is potentially a wealthy country. The ANC was brought to power with huge and enthusiastic support from the people. From the start however it was held back by the terms of the negotiated settlement which conceded political power to the majority but kept the economy firmly in the hands of the white, monopoly capitalist class.

Success governments did nothing to reverse this situation and indeed faithfully served the interests of this ruling class. Some, like Cyril Ramaphosa, joined it and became billionaires; others, like Zuma and his cronies adopted some of capitalism’s very worst characteristics, using their government positions to criminally and corruptly manipulate government contacts to make millions for themselves.

There is not the slightest hope of the ANC reforming itself. The two ANC factions are fighting each other not on political principles but for money and power, and whoever wins the leadership election in December, it will make no fundamental difference. 

We can only escape from the current disaster by adopting real radical economic transformation and a real fight against white monopoly capitalism, by adopting a new growth path based on the restructuring of the economy.

We have to escape from the colonial dependence of the export of raw materials and rebuild an economy based on manufacturing industry and the beneficiation of our plentiful natural resources. 

We must reverse the situation where today corporate income tax, paid by companies, has fallen from 54% in the apartheid era of their income to 28% now. That in itself would raise the money for free tertiary education.

We have to bring back the trillions rands stashed, often illegally, in tax havens, and invest it in manufacturing industry and job creation.

We shall never however fully achieve the goals of the Freedom Charter, while the economy remains in the hands of unelected, unacceptable, still mainly white-owned capitalist businesses, and their policemen in the credit ratings agencies. 

We have to nationalise the mines, banks and strategic monopoly industries under democratic workers’ control and use the countries’ wealth for the benefit of the majority, and not, like both Dlamini Zuma and Ramaphosa, capitulate to the dictates of the parasitic rich white monopoly capitalists and their credit ratings agencies.

Issued by Patrick Craven, Acting Spokesperson, SAFTU, 28 November 2017