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MTBPS — We must reimagine a different type of economic framework to avoid massive societal breakdown


Zingiswa Losi is President of the Congress of South African Trade Unions, Cosatu.

About 15 million South Africans currently live below the food poverty line, and the unemployment rate is sitting at a record 44%. These are the statistics that should inform this year’s Medium Term Budget Policy Statement.

The upcoming Medium Term Budget Policy Statement to be delivered on 26 October 2022 by Finance Minister Enoch Godongwana needs to respond to the real context of the economic crisis as experienced by millions of workers and their families every day. Many households continue to struggle to absorb the escalating living costs.

The current economic stagnation is proof that we cannot expect an economy based on laissez-faire free market principles to solve the issue of poverty, unemployment, and income inequality. The post-Covid recovery has highlighted the importance of government involvement in redistributing resources to the poor and marginalised communities.  

About 15 million South Africans currently live below the food poverty line, and the ‘expanded’ unemployment rate is sitting at a record of 44%. These are the statistics that should inform this year’s Medium Term Budget Policy Statement (MTBPS). The nation needs a clear strategy to help stimulate pro-poor growth and regenerate the economy.

In response to this economic stagnation, the government should stimulate the economy by doing the following: increase investment in the economy through infrastructure development due to its multiplier impact on growth and economic development; increase funding to the “training of layoff schemes”; and increase wages to motivate workers and create an environment that is conducive to create demand for goods and services.

Government should also provide funding to worker cooperatives to take over closed factories or those in liquidation/insolvency and nationalise companies that are not doing well in key sectors of the economy to retain skills and jobs. There is a need to increase social grants and use infrastructure projects to create decent permanent jobs.  

A new macroeconomic policy framework is needed because government cannot afford to rely on dangerous levels of inflationary borrowing to meet its obligations. To avoid a possible massive societal breakdown, government needs to reimagine a different type of economic framework which brings more people into the mainstream economy. The nation cannot afford to remain locked in an austerity framework because of the fear of ratings agencies.

At a global level, there is a need for alternatives in terms of credit ratings agencies that consider the developmental needs of a particular emerging economy. The biased and punitive approach of the dominant rating agencies has proven to do more harm than good.  

Workers also expect a coherent plan to fix our ailing SOEs. This needs to be expedited because we remain opposed to any plans to privatise them. There is an urgent need to close tax loopholes for the rich and illicit financial flows, illegally taking away about R147-billion annually out of the country.

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The nation also expects to hear whether government has a plan to manage the ever-increasing petrol price, reduce taxes on fuel, and to address the perpetual crises affecting the Road Accident Fund. This must include plans to rebuild Metrorail and Transnet to help protect rail commuters and food from the effects of inflation.

The MTBPS needs to include measures to end the crippling electricity rolling blackouts, including easing Eskom of its unaffordable debt burden to release its funds to prioritise maintenance and new generation investments. These twin challenges will worsen an already dire situation and devastate poor families and communities.

We also expect government and Parliament to expedite the processing of the Revenue Laws Amendment Bill, allowing financially struggling workers limited access to their pension funds. According to the Debt Counselling Association, about 10 million people in South Africa have bad debt, meaning they have missed three or more monthly repayments. These people have an average of eight loans each.

On average, people in bad debt spend 63% of their after-tax income on repayments. The South African Reserve Bank has depressingly pointed out that almost 73.7% of households’ income is spent on debt, while at the same time, consumer spending contributes 60% to the economy.

The federation has also noted that the number of entrepreneurs and start-ups in the country is not at the level of normal economies of our size. Entrepreneurship is important to address the unemployment crises This can take the shape of individual businesses or cooperatives.

One of the key challenges facing small businesses is the lack of funding. Young people are rarely targeted with subsidised credit, and they are not well served by the formal sector financial institutions. By becoming so profit-seeking, micro-lending institutions have also contributed to the marginalisation of young people as they resorted to charging high-interest rates and demanding collateral security for informal financing.

Banks must be engaged to provide affordable and accessible credit to young people wanting to set up their businesses. The National Youth Development Agency (NYDA) should be adequately funded so that it can play its developmental role of ensuring that young people seeking to set up their businesses receive the necessary support. 

There is also a need to develop a state bank and not-for-profit financial institutions that can reduce lending costs to young people.

Some government programmes like the Presidential Employment Programme and internship programmes which have managed to give relief to some unemployed young people, need to be expanded and should be compelled to pay young people a living wage.

Government must extend the SRD Grant which has provided badly needed relief to 10 million unemployed persons. It needs to be enhanced and linked to the food poverty line.

The MTBPS needs to include key interventions to tackle rampant corruption and hold the accused accountable. Additional support must be given to SARS to enable it to tackle tax evasion by the wealthy.

The rapidly deteriorating state of municipalities remains a matter of deep concern that requires a coherent plan from Cogta and the Treasury. DM



Comments - Please in order to comment.

  • Louis Potgieter says:

    There is so much need. But what is the use of this article, given that the budget is already prepared? Secondly, view the budget as a zero-sum exercise, and suggest where expenditure may be cut in order to fund the myriad of uses proposed. Thirdly, where is the mention of productivity and international competitiveness, and how a trade union may contribute thereto?

  • Cunningham Ngcukana says:

    Very good points but the reality is that money does not grow from trees. You need to have a tax base to finance all these social and welfare programmes. Without such a tax base you are moving towards Trussonomics. It is well and good to actually make demands from the budget but it is important to say where is the funding going to come from. There are competing demands in any budget and they cannot be funded at the same time. The reason Truss and her Finance Minister were thrown out were these fantasies you are raising that must come from a shrinking revenue. You are asking the country to increase borrowing basically to fund these at the same time. Tomorrow when the country goes to the IMF you will be saying a lot of hogwash. Having put Zuma to ransack the country and hollow out state institutions, you are asking us to pay for your fantasies. Yes, we need electricity to drive economic growth and we need money to fix the Eskom fleet. We must build new power stations whilst fixing the existing ones and in four years time we can have reliable electricity. To reduce the Eskom debt will not help but to build generation capacity and do maintenance will do. The NYDA must be closed as they have been a drain to the fiscus and small business must take over. The SRD grant must be used to build energy capacity and keep lights on.
    Building of Metrorail and reintroduction of Railway Police instead of security company hyenas of the ANC is the route to go. Money does not grow on trees.

  • Gerrit Marais says:

    Government and their policies, mismanagement, incompetence and thievery is the main reason we’re facing this social disaster. Now you want them to “redistribute”. What would this be, from whom should they take, how should it be taken and who will then get what? Also, the poor needs to take a lot more responsibility in terms of procreating well beyond their means. Ultimately I am asked to make good for the poor decisions of others. How many people will stick around in South Africa faced with this situation? They’re packing and moving their wealth as we speak. Yours is an illusion and definitely no solution. It only works where a country has the means through a fair tax system that provides reasonable returns to all taxpayers.

  • Miles Japhet says:

    In the face of overwhelming evidence that whatever the state touches results in dismal failure you suggest more of the same!!
    You need to get some basic lessons in economics – T shirt economics. Ask yourself why the T-shirt you wear is most likely made in China or Bangladesh – simple, the labour unit cost is lower than in South Africa (lower wages and higher productivity). All countries go through a period of building capacity and wealth by competing in the world markets and in later generations the move up the ladder occurs.
    There are no populist quick fixes. Your communist/socialist ideology has failed everywhere.

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