The 2020/01 Budget relief for the investors exclusion for the majority
Alternative Information and Development Centre | #Budget2020 Statement | 27 February 2020
Social and labour movements, under the banner of the Cry of the Xcluded, mobilised ahead of the 2020/21 budget, in expectation of deeper austerity. This is exactly what Finance Minister, Tito Mboweni delivered.
It is the excluded – the women who are being battered and killed and unpaid for their labour; the unemployed, the precarious informalised workers, the homeless and the landless – who will bear the brunt of this. The majority of those fortunate to have jobs will similarly suffer.
Not only has the government learnt nothing from the previous 25 years that have left us with crises of extreme inequality, mass unemployment and poverty, but to please the investors and credit rating agencies, they are now wanting to impose even more strident forms of the same policies and strategies.
Reducing government spending by one percent each year over the next three years, unavoidably means shrinking the economy, with disastrous consequences. At the very time the economy needs the injection of huge investments, government is choking the prospects of future development This makes no sense when private capital is on an investment strike.
Astoundingly, the budget provides tax relief for the middle classes of over R14 billion in the face of these dramatic budget cuts! More alarmingly is his announcement that corporate tax rates will be further reduced.
Mboweni’s budget underestimates the actual share of the budget that will go to debt servicing, which is projected to grow larger than the entire health budget. This is because Mboweni places the bailouts to SOEs as part of the non-interest expenditure component of the budget (R60-billion over three years for just ESKOM and SAA). However, as we all know the bailouts go to servicing the debts of the SOEs. It must be understood that this robs the fiscus of monies that should be used to meet the needs of our people. It is not as if there is no alternative. As AIDC and COSATU have argued, using the huge surpluses in the Government Employee Pension Fund and the Unemployment Insurance Fund is more appropriate and least damaging way of fixing our SOEs. Better still, would be the repudiation of much of the SOEs’ corruption linked debt.
The thrust of this budget is built on an attack on public sector workers. Over three years the budget baseline for different programs is to be cut by R261-billion. Of this, R160.2-billion are cuts in the “public sector wage bill”, starting with a R37.8-billion cut this year.
In fact, the day before the budget speech, the government unprecedentedly reneged on the existing 3 years’ wage agreement! Clearly, the credit ratings agencies and “investors” will be the first to cheer.
It is difficult to see, short of a massive capitulation of the labour movement, how President Ramaphosa’s social compacting strategy will survive. It is not just the union members who should be outraged. Poor and working class communities who depend on government services will be the ones that suffer.
The reduction of the wage bill will be achieved both by holding down wages and retrenchments.
To make matters worse, almost R100-billion will be cut from vital infrastructure over three years – education infrastructure, human settlements, municipal infrastructure, health and transport. This will result in further dilapidation of essential services.
There is nothing in this budget that facilitates an exit from economic stagnation. To the contrary, austerity will drive the economy into the ground, as it has done in other parts of the word. What South Africa can look forward to is a vicious cycle of anger, disillusionment and despair. No doubt, the politics of populism and narrow nationalism are what have now been bequeathed by the government.
The labour and social movements, which mobilised under the banner of Cry of the Xcluded, will be more relevant than ever. Their task is to vigorously promote the many concrete alternatives that were raised in the recent Real Jobs Summit, including concrete proposals for sustainably taxing the super wealthy and the corporate elite to mobilise the resources for a redistributive economic strategy.
Dick Forslund, firstname.lastname@example.org
Dominic Brown, email@example.com