/ 24 February 2022

Opposition parties criticise Godongwana over public sector wage bill, state-owned enterprises

South Africa's Finance Minister Enoch Godongwana Presents Budget
Finance Minister Enoch Godongwana noted that South Africa’s position on Israel’s occupation of Palestine has always been clear. (Dwayne Senior/Bloomberg via Getty Images)

In his 2022 budget tabled on Wednesday, Finance Minister Enoch Godongwana did not go far enough to address the public sector wage bill and escalating costs from the national debt and failed to give precise details on resolving the problems faced by state-owned enterprises (SOEs), the Democratic Alliance said.

The official opposition expected Godongwana to provide a firm pathway towards fiscal discipline and economic growth, DA head of finance Dion George said, adding: “Instead, he opted for a cautious approach that does not go far enough to restore fiscal discipline and create jobs.”

Godongwana expects further salary increases for public sector workers arising from a new round of collective bargaining expected to start in March 2022. The DA’s position is that there must be a salary freeze for non-occupation specific dispensation staff. 

“As long as the government keeps kicking the wage bill down the road, the threat of a budget blowout will remain high,” George said. “It is clear that ballooning state expenditure has been driven by wage demands in the public sector, and unions, as well as the radical economic transformation faction in the ANC, and will not allow the government space to contain this spiralling cost.”

He said the finance minister had not been bold in addressing non-priority spending within the state, a key requirement in addressing the national debt crisis.

The DA welcomed the reduction in corporate income tax by one percentage point to 27%,  but said GDP expansion was still too low to support the creation of jobs.

“Projected average GDP growth of 1.8% over the next three years will not be enough to address South Africa’s high unemployment rate which reached 34.9% in the third quarter of 2021,” said George. 

SOEs continue to pose a fiscal risk, he said: “In this budget, it was made clear that the fiscal balance sheet continues to be exposed to significant financial guarantees and direct cash support to SOEs such as Denel, SAA and the Land Bank. The government should instead be readying SOEs for private sector investment to increase their competitiveness and profitability.”

The treasury has allocated arms manufacturer Denel another R122-million to meet its debt obligations, after giving it a cash injection of R2.923-billion in last November’s medium-term budget policy statement.

The Inkatha Freedom Party said Godongwana missed an opportunity to deal with the future of SOEs.

“It is distressing to hear that Eskom will continue to get financial assistance to the tune of R88-billion,” said IFP deputy president and finance spokesperson Mzamo Buthelezi.

Power utility Eskom has been provided with R136-billion to pay off its debt with a further R88-billion until 2025-26. Godongwana said he wouldn’t change his “tough love” approach to troubled SOEs, with no provision made in the budget for any of them other than Eskom and the small amount for Denel.

The IFP welcomed the budget allocations to education, health and social development, as well as the prioritisation of infrastructure catalytic projects. It also applauded the allocations to the department of justice and constitutional development and the additional R8.7-billion set aside for the police department.

Buthelezi said that overall, Godongwana had a mammoth task at hand, and appeared to be merely placing financial “plasters” on the many wounds of an already sinking ship.

“The division of revenue will simply carry us for a few more years, but if we do not stop to reflect, repair, and effectively build back a better vessel, we will tank this economy,” Buthelezi warned.

Anathi Madubela is an Adamela Trust business reporter at the M&G.