Finance minister Enoch Godongwana.
(Photo by Jeffrey Abrahams/Gallo Images via Getty Images)
Political parties and trade unions are asking Finance Minister Enoch Godongwana to tackle the growing national debt, impose additional taxes on the wealthy and to spur investment in public infrastructure.
Godongwana is set to deliver his maiden national budget speech as he tries to steer the economy onto a stronger growth path after the ravages of the Covid-19 pandemic over the past two years.
The main opposition Democratic Alliance pre-empted him on Monday by tabling its own alternative budget, in which it said it would reintroduce the Fiscal Responsibility Bill to bring national debt under control and introduce a statutory fiscal rule for the first time.
The bill provides for a rule stipulating that net loan debt, as a percentage of GDP, may not exceed the net loan debt of the previous year.
DA head of finance Dion George said President Cyril Ramaphosa’s government was unable to meet its spending obligations from the fiscal balance sheet and had hence been forced to borrow from global finance institutions, such as the International Monetary Fund (IMF).
South Africa recently received an extended emergency loan of R76-billion from the IMF.
“Failure to take the necessary steps now to address the growing national debt crisis, restore economic growth and the conditions necessary to create jobs, will push South Africa further into the debt embrace of the IMF and World Bank, this time for loans with more onerous conditions,” George said.
The DA said, through targeted spending cuts and savings, its debt-containment model would bring national debt under control sooner, and at a lower rate, than the ANC government’s stated objective.
Trade union federation Cosatu, Cosatu which is in the tripartite governing alliance with the ANC and the South African Communist Party (SACP), said it hoped Godongwana would finalise legislation to allow highly indebted and financially distressed workers limited access to their pensions.
The treasury’s head of tax and financial-sector policy Ismail Momoniat said that the proposed pension system would allow for limited withdrawals, but still preserve adequate funds for retirement.
The SACP urged the finance minister to demonstrate commitment to industrialisation, through increased budget allocations for the purpose.
A common thread in terms of budget demands was for social relief, whether through the extension of the Covid-19 related social relief of distress grant, or long-mooted basic income grant (BIG).
In his State of the Nation Address earlier this month, Ramaphosa announced the extension of the R350 social relief distress grant for another year
— until the end of March 2023.
George said because the poor and vulnerable continued to shoulder most of the economic burden from the disruption caused by Covid-19 and lack of growth in the economy, government spending on direct cash support for the poor should not be cut.
George said the view of the DA was that the basic income grant would provide an economic floor for the most vulnerable as well as put money directly in the hands of the people who were best placed to decide where to spend it.
“However, we are concerned that the country simply cannot afford to support a growing number of dependents in an environment of low growth and a shrinking revenue base. It would seem, therefore, that a basic income grant would become increasingly feasible as an expenditure from the proceeds of growth, as opposed to increased taxes,” said George.
In its make-believe budget, the DA said it had budgeted an additional R105-billion over the next three years for the introduction of a conditional BIG, which would, however, be made available only from revenue generated from GDP growth. It would not be funded from additional tax.
Cosatu said it expected the budget to provide for funding to extend the R350 grant and narrow the gap, with the food poverty level of R624. The food poverty line — which refers to the amount of money that an individual needs to afford the minimum required daily energy intake — was increased by more than 6% last September, from R585 previously, according to Statistics South Africa.
The SACP said it welcomed the extension of the social relief of distress grant, but recognised that it did not cover all aspects of its social policy call.
“Our proposal is that the government should commit to retaining the [R350] grant and … this should be an integral social policy provision of a wider imperative to build a minimum income guarantee programme in pursuit of a comprehensive social-security system and poverty-eradication strategy,” the party said.
The DA slammed Ramaphosa’s announcement that preparatory work had begun to establish a state-owned holding company to house all commercial state-owned entities (SOEs), saying this would do nothing to solve the current systemic challenges affecting these companies.
“Instead of creating a new SOE to manage bankrupt SOEs, the government should be readying them for private sector investment entities. Only a systematic programme of private-sector participation will remove SOEs from being a burden on the fiscus and make them competitive in the market,” said George.
Cosatu has called for additional support for state power-utility Eskom to reduce its debt, ramp up essential maintenance, bring on board new generation and tackle corruption.
“The economy needs a reliable and affordable electricity provider if it is to recover, the labour federation said, also calling for urgent interventions to save Transnet and Passenger Rail Agency of South Africa, through making resources available to protect railway lines and banning the sale and export of scrap copper.
Cosatu also urged Godongwana to put plans in place to stabilise and reposition other embattled SOEs, such as arms maker Denel, the South African Post Office and public-broadcaster the SABC.
Godongwana did not offer any bailouts for SOEs in his medium-term budget policy statement last November, saying he was giving them “tough love”.
Anathi Madubela is an Adamela Trust business reporter at the M&G.
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