The 2019/20 budget speech presented this week by Finance Minister Tito Mboweni maintained the approach that has led us to this economic quagmire.
It failed spectacularly to respond to the real context of the economic crisis as experienced by millions of workers and their families every day.
It should be noted that this budget has come at a time when many households continue to struggle to absorb the escalating living costs since last year’s VAT hike.
Last year’s VAT hike found many low-income households already in a severe economic crisis.
Add to this the fact that, over the past five years, unemployment has been getting worse.
Out of the 9.2 million South Africans who are unemployed, about 8.3 million are black. The expanded unemployment rate for black South Africans is 41%.
About 12.1 million black South African workers support 45.7 million people, who live in 13.5 million households.
According to Stats SA, 13.8 million people live below the food poverty line and 30.4 million live below the upper-bound poverty line. For black South Africans, about 29 million live below the upper-bound poverty line.
These are the statistics that should have informed this year’s budget because this is an abnormal situation that cannot be allowed to continue indefinitely. But there was nothing in the budget that provides for the possibility to change the outcomes of our economic development trajectory. There was no clear strategy presented by the minister to help stimulate growth and regenerate our economy.
At a time when the government is less and less able to meet its obligations through taxation, and after a decade of resorting to dangerous levels of inflationary borrowing, we expected a new approach that would explore an alternative economic developmental model.
But it is clear that the same macroeconomic policy framework that was applied before will continue to be used, despite the rhetoric about the centrality of job creation and the transformation of the economy.
The budget speech offered no concrete strategies to help us create alternatives to the neoliberal development strategy that has left many workers and poor people mired in poverty.
At a time when we needed to work on developing an alternative production system that is based on domestic demand and human needs, this budget continues to be focused on the needs of the formal economy.
It is also obvious that there is no plan to wean people off social grants because this budget will not transform the economy or the low baseline wage regime that has kept many people dependent on government.
The government continues to believe that foreign direct investment is the only solution, and the commitments made during last year’s investment and jobs summits have been outsourced to the private sector.
The survivalist informal economy that feeds and clothes many families in townships and rural areas remains isolated from the mainstream economy because this budget still focused on the formal economy.
The minister’s inflammatory and misleading rhetoric about the public sector wage bill threatening the state’s survival did not fade away, despite the same budget showing that the wage bill is, in fact, stable and in line with international norms at 35%.
Notably, the budget presented no coherent plans or strategies to fix our ailing state-owned enterprises (SOEs).
This was not accidental because for more than two decades, National Treasury has been trying to privatise these state entities without success.
There is no intention to fix the SOEs, but there is a plan to use their unaffordable debt as an excuse to privatise. The rationalisation of SOEs and the conversion of debt into equity is a fancy way of saying: ‘We will privatise the SOEs.’
There was an enthusiastic introduction of carbon tax and an increase in the sugar beverages tax, but this is no longer accompanied by a promised commitment to a just transition and a jobs plan that will protect vulnerable workers’ jobs in these sectors.
It was a good thing that the government increased funding for free tertiary education, including the allocations to address the school infrastructure and sanitation crises. But this will work only if we ensure that the students who are currently at school have a job to go to after finishing their studies.
We also find it commendable that the minister allocated money for filling medical positions and also increased allocations towards the implementation of the National Health Insurance scheme. More needs to be done to arrest the collapse of public healthcare – in particular, its infrastructure – and we are on the right path by increasing funding for healthcare.
This, though, will be undermined by the plan to release experienced or old public servants and replace them with younger workers to reduce the wage bill. You cannot replace experience without feeling the effects.
The government is so fearful of the private sector and the ratings agencies that it cannot even imagine adjusting company income tax from 28% to 30%, when it was at 34% five years ago.
There is also no plan in this budget to close tax loopholes for the rich, who are illegally taking about R147 billion annually out of the country.
The sad reality is that lower wages of the workers and inconsequential increases of social grants do no help people to absorb the affordability crisis or start building alternative pathways to a livelihood.
To avoid a possible massive societal breakdown, we have to reimagine a different type of economic framework, which brings more people into the mainstream economy.
We will never do this while we remain locked in an austerity budget, paralysed by fear of ratings agencies and budgetary deficits.
We need to learn from Malaysia. In Malaysia, before the government introduced the new economic policy, it had to be forced to do so by violence, which was meted against the elite Chinese Malay. Prior to the 1970s, Malaysia was focused on growth and exports, and neglected the empowerment of the indigenous Malay majority.
In 1969 there were riots, which resulted in the killing of Chinese Malays. It was only after these riots that the Malay government introduced the new economic policy, which sought to increase state intervention in the economy and to introduce redistributive economic policies such as affirmative action and quotas.
The time is running out for our government to act and the people are running out of patience.
- Ntshalintshali is Cosatu’s general secretary