Finance Minister Tito Mboweni. (David Harrison/M&G)
Opposition parties have mainly welcomed Finance Minister Tito Mboweni’s budget speech, saying he did not have much room to manoeuvre.
Taxpayers and business alike breathed a sigh of relief when Mboweni announced marginal tax cuts over the next financial year.
A predicted one percent value-added tax (VAT), speculated by economists, also did not materialise.
A tight spot
Speaking outside the National Assembly after the budget speech, opposition parties said they recognise that Mboweni has little room to move.
It’s a difficult line he’s trying to manoeuvre. It’s not a pro-poor budget. And I don’t think he said anything that is going to stimulate the economy except for a few cosmetic changes. But we understand what position he is in
Narend Singh
With tax revenue lower than expected, a public-wage bill that continues to weigh heavy on the fiscus, and money being lost through irregular and wasteful spending and corruption, there is sympathy for Mboweni.
The Democratic Alliance’s finance spokesperson Geordin Hill-Lewis supported the announcement of no direct tax increases on individuals salaries and business.
The idea is that with more money to spend, consumers could help spur economic growth. Businesses could also use the extra income to reinvest in their enterprise and employ more workers.
“We welcome that there’s no tax increase, and in fact income tax relief. That’s great news and it is pro-growth. That’s more money in our pocket and it’s good for the economy,” Hill-Lewis said.
The DA said Mboweni’s real test will come when he confronts labour unions over plans to cut the public wage bill.
In his speech, the finance minister said the government plans to cut the public wage bill by R37.8-billion. That could either mean pay freezes or staff cuts.
“We welcome the tough talk on the public-sector wage bill,” said Hill-Lewis. “The question remains: Can it be delivered? It’s a number in a budget but it hasn’t been negotiated yet with public sector unions and whether it can be delivered, that remains to be seen. If not, then the minister has a credibility problem.”
The Inkatha Freedom Party’s chief whip Narend Singh acknowledged that Mboweni does not have much to work with, adding that the speech didn’t inspire much confidence.
“It’s a difficult line he’s trying to manoeuvre. It’s not a pro-poor budget. And I don’t think he said anything that is going to stimulate the economy except for a few cosmetic changes. But we understand what position he is in,” said Singh.
He said he expected more details on the plans to restructure electricity supplier Eskom, and what exactly the government’s programme for ailing state-carrier South African Airways was.
“He could have been more upfront about what is going to happen with state-owned enterprises (like Eskom, and SAA). Are we going to privatise, semi-privatise, bring in partners? But just saying we’re going to bail them out, we’ve been hearing that over and over again,” Singh said.
Enter austerity
Without mentioning the word, Mboweni’s announcements that social spending on health, education, and social welfare will be trimmed down, indicated an era of austerity.
The cuts are part of a swathe of cost-cutting measures to keep the economy on budget.
But the IFP’s Singh said this could have negative consequences on those who need state assistance the most.
“We’re concerned about the cuts to social expenditure, particularly cuts to education, health, and social grants as a collective. These are the areas that become the safety nets for our communities,” he said.
The United Democratic Movement’s Nqabayomzi Kwankwa described Mboweni’s priorities as lopsided.
“You have a government who is going to give R16.4-billion to SAA over the medium term. That same government only gives R2.2-billion to small businesses, which are important in reigniting growth. We spend more money on debt services costs than we do on community development,” Kwankwa said.
Plugging the hole
Opposition parties accused Mboweni of paying lip service to issues of corruption and irregular and wasteful expenditure.
While the finance minister announced plans to fund the National Prosecuting Authority’s special investigating team looking into corruption, political parties say it’s too little too late.
“To say we are going to have another 200 prosecutors isn’t going to solve the problem. We need to ensure that swift justice is carried out. Justice delayed is justice denied particularly in the area of corruption where there is the biggest leakage of taxpayers money,” said the IFP’s Singh.
We welcome the tough talk on the public-sector wage bill… The question remains: Can it be delivered? It’s a number in a budget but it hasn’t been negotiated yet with public sector unions and whether it can be delivered, that remains to be seen. If not, then the minister has a credibility problem.
Geordin Hill-Lewis
Kwankwa said it appears Mboweni and his boss Cyril Ramaphosa don’t have a plan to stem the outflow of money from the state kitty.
“He mentioned corruption in passing. Just like the president, he didn’t say anything concrete about what they intend doing to those who loot state resources. It’s concerning because the savings that will be made by trimming the public sector wage bill will only be channelled to SOEs like Eskom, SAA, and other wasteful expenditure that is taking place.”
But the most stinging rebuke for Mboweni was probably from his political party’s (the ANC) alliance partner, trade union federation Cosatu.
The labour federation described the speech as underwhelming and provocative, particularly in response to Mboweni’s plans to trim the public wage bill.
“Cosatu and millions of workers had hoped to hear a clear diagnosis of the problems, a road map to address them and an end destination in the budget speech. Tragically we have seen little to give us hope. Instead, we see tinkering on the side and a lazy attempt to dump the bill for industrial-scale looting upon public servants,” a union statement read.
Cosatu said it is looking forward to meeting with the government and the department of public service and administration to work on how to cut costs.
But the union said it won’t be at the expense of workers. “Cosatu is ready to engage government on measures to stabilise the public fiscus. We have made proposals to government in this regard. This includes reducing bloated executive and management posts and perks, placing public sector entities and enterprises under a single public service and sector collective bargaining process, eradicating ghost posts, consolidating state entities and municipalities and filling of critical front line service delivery posts and possible reskilling and redeployment of staff as needed.”