As pronounced by Finance Minister Enoch Godongwana in the Medium-Term Budget Policy Statement (MTBPS), the spending proposals affirmed the “fiscal consolidation” – meaning brutal austerity or cut of expenditure – that the ANC government ushered in just as the Covid-19 pandemic hit in early 2020, starting with Treasury’s R3,9-billion cut in health spending.
Did not change the fiscal consolidation plan
Like so many before it, Godongwana’s speech was carefully crafted to raise alarm, sow illusions and arouse hysteria around the deficit and debt-to-GDP ratio. But Saftu has always maintained that debt-to-GDP is not a proper barometer through which we should measure state fiscal capacity. The measure radically underestimates the real capacity of states to support economic growth, because in our own case, the minerals under the soil – owned by the state and valued by Citibank in 2010 at R36-trillion, the highest in the world – implies greater fiscal expansion potential, in what is the world’s most unequal society.
In any case, South Africa’s current public debt to GDP ratio of 70% is less than the 80% projected a year ago (in part because GDP was raised in a “rebasing” in mid-2021). That 70% puts South Africa at #60 in the world; 59 other countries have higher debt/GDP ratios than South Africa today. And historically there were other periods when debt/GDP was higher in South Africa, including the 1914-32 period. And it was in the 1930s that the national state dramatically increased public enterprises (like Iscor, the SA Post Office and the predecessors of Eskom and Transnet) and hired thousands of workers.
In 2020, the government set out in the MTBPS ― a government spending proposal for the coming three years ― “to reduce the fiscal deficit and stabilise the debt-to-GDP ratio” until 2024. The implementation of this fiscal consolidation means targeted cuts in the budget across all areas of potentially progressive spending, from infrastructure investment, to provision of goods and services, to the civil service wage bill.
In the MTBPS for 2022, none of the cuts proposed in the 2020 MTBPS have been reversed. The greatest victims of that MTBPS were the public sector wage bill; the Health, Education and Social Development departments; social grants, to mention a few. Godongwana is digging the hole even deeper, and he will be permanently blamed for the damage done to children’s schooling, to health services and to those who now must go hungry since even the measly R460/month Child Support Grant will be cut in real terms.
Though the consolidated expenditure is set to increase by 1.7% over the next three years, this is no way an indicator of growth in government expenditure. The 1.7% is merely nominal growth, but factoring in inflation of 4.9% this year, the real government expenditure growth rate is negative (-3.2).
In 2022/23 and 2023/24, there will be steep declines in government expenditure in both nominal and real terms for all departments except “economic development” and “community development”. The departments that will be badly affected by budget cuts in the next two years – with inflation of 4.9% in 2021-22 and anticipated 4.0% in 2022-23 – include but are not limited to:
- Basic Education: from R281,8-billion in 2021/22 to R279-billion in 2023/24 (using Treasury inflation accounts in this sector, this represents an 12.6% real decline);
- Health: from R259-billion in 2021/22 to R243-billion in 2023/24 (which with inflation of 4.9% and 4.0% the next two years, will be a real decline of 15.1%);
- SAPS: from R109,2-billion in 2021/22 to R106,2-billion in 2023/24 (a 11.7% real decline); and
- Social Development: from R399,6-billion in 2021/22 to R320,4- billion in 2023/24 (a 23.8% real decline, even though increases in population and poverty are anticipated, which will require much higher commitments).
In the remaining period of the current fiscal consolidation (2021-24), several other sectors – health, home affairs and social development – are going to suffer serious cuts in nominal and real terms. These cuts are going to be sustained despite consistent complaints from the public indicating systemic failures in these departments. Home Affairs is plagued by a backlog in services which are created by understaffing and IT failures. Education is inadequate in part due to high student-teacher ratios. And horrors in hospitals have increased due to chronic understaffing.
In a misleading fashion, Godogwana announced that “spending on social wage has grown from R860-billion in 2018/19 to R1,1-trillion in 2021/22” and that the tiny R350/month Social Relief of Distress (SRD) grant “has benefitted 9,5 million South Africans”. This was tailored to solicit empathy from the public, whilst masking the underlying austerity cuts, especially given that inflation for poor people is much higher than it is for the wealthy in South Africa, as even the International Monetary Fund acknowledged in 2018.
In March 2021, Treasury set out to cut R36-billion from social protection grants in the next three years, starting with a decline next year from R257-billion to R238-billion. The reinstatement of the SRD grants until 2022 is estimated to cost the government R23-billion. This means the government has not increased spending in order to provide the SRD grants, but merely took R23-billion of the R36-billion that they have planned to cut in the next three years.
In fact, in the current Medium-Term Expenditure Framework (MTEF), social security funds – consisting of the Road Accident Fund (RAF), the Unemployment Insurance Fund (UIF), and the Compensation Fund – will be cut from R142,8-billion this year to R81,9-billion in 2022/23. All indications are that the Treasury will argue against tapping the UIF again for emergency relief to the still-growing pool of unemployment, as well as against any additional social security grant that was introduced as a result of Covid-19, including SRD grants.
Basic income grant
Because of its obsession with the neoliberal fiscal restraints, the government proposed in October 2021 to introduce a “family grant”. Outlined in the abridged draft of the Anti-Poverty Strategy, a “family grant” is the Treasury option that would allow Godongwana to reject the basic income grant (BIG). Through this family grant, Treasury will exclude more unemployed people, will introduce a burdensome “means test” on income, and will further penalise women due to the way South African capitalism has amplified patriarchy at the household level, often preventing women from getting access to funds and causing strife in families. Saftu rejects the “family grant”, and commits to supporting campaigns for a universal BIG – at the upper bound poverty line – to be funded by more progressive personal and corporate taxation.
Saftu reiterates its demand for a BIG that, in turn, will have positive multiplier effects in the economy by boosting demand and production, whilst relieving poverty among the unemployed.
But Godogwana did not speak of this sham family grant as media reports anticipated, nor about BIG. Such silence does not surprise us, because in their lekgotla, ANC’s economic transformation committee said it “should not be given any new shopping list”. This was the ANC affirming its commitment to fiscal consolidation, an austerity policy celebrated by the bankers even while the potential for more powder keg explosions – such as occurred in July – is now greater than it was before this budget statement.
Consequences of fiscal consolidation thus far
The negative consequences of austerity are manifest in systemic paralysis across the public sector. Examples include the reduction in headcount of public servants, worsening infrastructure in schools, poorly maintained fleets, lack of equipment and resources, etc. For instance:
- The KwaZulu Natal Department of Basic Education has already reduced its headcount by 6,000.
- In the Eastern Cape, 1,142 schools have been gazetted for closure. This means teaching posts will also be reduced. In March this year, the unfilled vacant posts in the Education Department stood at 24,000.
- Home Affairs staff will be reduced by 834 jobs.
- The South African Police Service headcount will be reduced by 10% between 2020/21 and 2023/24. This means by the end of the financial year 2023/24, there will be 18,399 fewer police officers,
- Statistics South Africa’s headcount will be reduced by 146;
- The judiciary will shed 815 posts;
- Correctional Services will shed 1,027 posts; and
- The health sector is said to be sitting with 40;000 unfilled posts. Given the huge knock it took in the Budget, it is more likely to reduce its headcount in great numbers in the next three years.
The general dissatisfaction with the quality of services provided in public institutions has its source in the austerity cuts carried out by the ANC government. Workers in the public sector, especially those in institutions that offer services directly such as schools, prisons, police stations and hospitals, are operating under extreme conditions of distress and depression because of the workload that arises out of understaffing, and lack of resources.
Saftu demands that the government:
- reverse the budget cuts, and increase spending in critical areas for society, environment and infrastructure investment;
- ensure public sector wages are budgeted sufficiently for the headcount of workers to be increased significantly across all departments, given the sustained failure to hire;
- invest in infrastructure for public institutions;
- introduce a monthly basic income grant of R1,500;
- introduce a job guarantee scheme;
- provide a genuine fiscal stimulus – Saftu still believes R1-trillion is appropriate – which can be funded by halting money currently being lost in the economy through clamping down hard on tax dodging (which Judge Dennis Davis says conservatively can raise R50-billion annually), tightening exchange controls to halt illicit financial outflows (up to R400-billion annually according to Treasury), recovering R300-billion lost through outright stealing of 35-40% of the procurement budget (according to a Treasury official) through insourcing, reversal of the corporate tax cuts which were 52% on the even of the death of apartheid in 1992 and are now just 27%, and taxing the R1,4-trillion hoarded by the corporations; and
- overhaul the economy to base it on the need to address unemployment, poverty, inequality, and the lack of property and land controlled by the majority. DM