Time for Treasury to Make Bold Decisions
AIDC Statement | 29 October 2019
On the eve of Finance Minister Tito Mboweni’s second mid-term budget speech in office the writings on the wall. If the latest Medium-term expenditure framework and the Mboweni strategy for economic growth document are indicators of what’s to come, then we can expect budget cuts and the dream of an export-oriented growth path.
The three-year budget plan from the Treasury proposes cuts in government’s non-interest spending by 3.4%in real terms, i.e. after taking inflation into account. Government spending comprises almost a third of GDP. So, a real cut of 3.4% is the equivalent of more than 1% cut in GDP. This will result in the further contraction of the South African economy and the poor will end up paying the price.
Austerity is precisely the wrong medicine for the very sick South African economy. At close to 40% unemployment – unemployment should be considered to be a national disaster. In this context SA needs MORE state-led investment, not less.
As millions of school children across the world have shown any such reprioritisation must take into account the climate crisis. Our country is crying out for a new green deal that confronts mass unemployment and inequality head on. We call this a commitment to a wage led, low carbon development strategy. This would involve a massive investment in a mass housing programme, located in the centres of our city
Instead of a fiscal stimulus, government proposes that cuts to its expenditure is the only way to resolve Eskom’s financial crisis. However, the GEPF is a major creditor of both the government and Eskom. With a contribution holiday, the R1.8tn in the GEPF’s fund would decrease by R25bn, all things equal.
The contribution holiday would pose no threat to the guaranteed pension and benefit payments to state employees and their spouses. The surplus after paying all pensions and benefits amounted to R47.5bn in 2018. An additional R100bn can be borrowed to Eskom at a zero percent interest rate.
History is the accumulation of various moments over time. Sometimes there is a tipping point where new paths can be chartered. This MTBPS is one such tipping point or moment. It is at moments like these where radical departures from the status quo are necessary. Minister Mboweni must take bold action, part of this includes a commitment from the state to invest in low-carbon re-industrialisation programme.