COSATU Submission on Medium-Term Budget Policy Statement
COSATU expresses disappointment with the Medium-Term Budget Policy Statement, criticizing Treasury for its lack of bold initiatives to stimulate the economy and address pressing social challenges. The submission highlights concerns over austerity measures and wage cuts, emphasizing the need for a more sustainable approach to reduce debt while prioritizing economic growth and public services.
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COSATU Submission: Medium Term Budget Policy Statement: Division of Revenue Amendment Bill Standing & Select Committees: Finance Parliament 17/11/2023 1
Introduction Workers & entire country looked forward to Government s tabling a bold, decisive & progressive Medium-Term Statement (MTBPS) at Parliament. Tragically, yet again, Treasury failed to rise to occasion. Instead of tabling a bold MTBPS to stimulate economy, provide relief to the poor & rebuild the state; it chose to deliver an underwhelming accounting note with reckless cuts to budget allocations & below inflation increases to Departments pencilled in over the MTEF. Budget Policy 2
Fiscal Framework We will not emerge from our crises if we continue to stumble along with 0.9% & 1.4% GDP growth. SA is facing a myriad of very difficult challenges: Tepid economic growth; 42.1% general & 60% youth unemployment; Endemic crime & corruption; Painful period of loadshedding; Cable theft crippling passenger & freight railway network & inefficient ports; Dysfunctional municipalities; Ingrained poverty & inequality; & Feeding a general sense of despair. 3
Fiscal Framework COSATU is dismayed by Treasury's decades long addiction to economic & fiscal policies that have not succeeded by any yard stick. We should not be surprised when these policies continue to fail. In 2020, Treasury imposed ill-conceived wage freeze on public servants & subsequently below inflation increases have been effected. Yet fiscus & economy remain in a crisis because obstacles to growing economy have not been fixed, e.g. ensuring affordable electricity, reliable rail & efficient ports. 4
Fiscal Framework We have been astounded by attempts to impose misguided austerity government in run up to MTBPS, including freezing vacancies & infrastructure investments. We appreciate fiscal constraints facing state & need to cut fat & reprioritise expenditure, but Treasury s blunt expenditure cuts in an economy desperately needing stimulus & well-oiled public services, will only choke economy & weaken already enfeebled public & municipal services. What is needed is to grow economy, only sober & sustainable path to reduce debt trajectory. budget cuts across 5
Public Service Wage Bill Treasury s narrow fixation on cutting wage bill is a lazy option that will not resolve multiplicity of crises facing SA. Underpaying a nurse will not get trains to run on time. What it will does is fuel brain drain of skilled public servants to better paying & less stressful jobs overseas. We should not fall for reckless narrative that says public service is bloated. In 1994 we had 1 million public servants & 34 million people, today its 1.2 million public servants, yet nation nearly doubled to 62 million. 6
Public Service Wage Bill Crises we are facing is not an expenditure crisis. Wage bill has been stable for a decade. MTBPs exposes myth of out-of-control wage bill by its admission austerity budget cuts have reduced wage bill from 35% to 31% of the budget! The crisis is a collapse in company tax. This is due to rapid deterioration in Transnet s capacity to transport mining, manufacturing & agricultural products to markets timeously. Mining industry is major contributor to state through company taxes & earner of investment & foreign exchange for economy. 7
Division of Revenue Amendments COSATU appreciates need to adjust allocations at times because of unexpected & urgent new priorities. We appreciate a large component of DORA Bill adjustments, R17.6 billion) caters for 2023/24 wage agreement. Whilst some blame workers for negotiating increases to protect their wages from inflation erosion, workers have the right to a living wage. Rebuilding collective bargaining & multi-year agreements will avoid need to adjust budgets afterwards to accommodate wage agreements.8 under expenditure &
Division of Revenue Amendments Welcome additional allocations of R1.2 billion & R372 million for infrastructure damaged by natural disasters. We are however concerned about cuts in provincial grants worth R6.2 billion. Equally concerning are cuts to infrastructure grants of R1.7 billion & municipal infrastructure of R1.2 billion. Whilst appreciating the pressures to reprioritise, we are deeply concerned about significant austerity budgetary cuts to the following Departments programmes: 9
Division of Revenue Amendments Basic Education: Infrastructure R1.6 billion, School Infrastructure Backlog R179 million & Early Childhood Development million. Health: District Health (HIV/AIDS) R1 billion & Health Facilities Revitalisation R440 million. Agriculture, Land Reform & Rural Development: Comprehensive Agricultural Support R124 million. Human Settlements: Development R1.7 billion & R553 million, Informal Settlements Upgrade R476 million & R305 million. Infrastructure R58 Urban Settlements 10
Division of Revenue Amendments Transport: Provincial Roads Maintenance R550 million & Public Transport Network R600 million. Integrated National Electrification Programme: R302 million & R180 million. Water & Sanitation: Regional Bulk Water Infrastructure R236 million & Water Services R244 million. 11
Division of Revenue Amendments It is worrying that the DORA Bill is silent on reasons & impact for some of these cuts. Is it simply due to need to cut costs & then what is the impact on service delivery? What mitigation measures can be put in place? Or are they also due to a failure to spend money or savings identified to prevent wasteful expenditure? What measures are being put in place to capacitate provincial & local governments to prevent such reoccurrences? 12
Local Government 90% of municipalities in financial distress with 27 failing to pay staff wages & transfer deductions. Residents owe municipalities R280 billion in electricity bills & municipalities owe Eskom R57bn. Many fail to provide basic services or indigent grants & subsidies. Companies are closing & retrenching as a result. Local government remains corruption hot spot. Few measures or roadmap to District Development Model to address these crises. 13
Municipalities Routinely Failing to Pay Workers Eastern Cape: Amathole, Amahlati, Raymond Mhlaba, Enoch Mgijima & King Dalindyebo. Free State: Mohokare, Kopanong, Masilonyana, Tokologo, Maluti a Phofung, Mafube & Letsemeng. Gauteng: Emfuleni. Limpopo: Fetakgomo-Tubatse, Aganang/ Polokwane & Modimolle-Mookgophong. 14
Municipalities Routinely Failing to Pay Workers Northern Cape: Magareng, Renosterberg, Kama Kheis, Thembelihle & !Kai !Garieb. North West: Ditsobotla, Kgetlengrivier, Mamusa, Mahikeng, Naledi & Tswaing. 15
COSATU Budgetary Proposals If Transnet is not turned around fast, we will face a mining jobs bloodbath & a revenue crisis no amount of pickpocketing public servants will fix. If we are to grow economy & reduce unemployment & thus generate revenue state needs to reduce debt, then government needs to deal with real obstacles suffocating economy, workers & businesses. Government needs to signal shift from Treasury s tried & tired macro-economic policies & table aggressive Budget at Parliament that protects the poor, rebuilds the state & grows economy, e.g:16
COSATU Budgetary Proposals Provide additional support to Eskom, which is turning the corner & making considerable progress, to end loadshedding & ensure reliable & affordable electricity. Urgently intervene at Transnet & Metro Rail to secure & rebuild our freight & passenger railway network & modernise our ports. Transnet has to be state s number 1 priority. The lack of clear plans in MTBPS to support these critical SOEs is alarming. 17
COSATU Budgetary Proposals Stabilise overhaul dysfunctional municipalities & restore basic services. Debt relief provided for various municipalities is positive but needs to be accompanied by capacity building interventions. Allocate additional resources to SARS to tackle tax & customs evasion, conduct lifestyle audits of wealthy & generate badly needed state revenue. SARS has proven itself to be remarkably efficient & needs to be given further funding to increase tax compliance from 64% to 70% over next 2 years, generating additional R120 billion in state revenue. 18
COSATU Budgetary Proposals Fill critical frontline vacancies in public service, especially SAPS, NPA & Courts, enabling them to crack down on crime & corruption. Give relief to commuters & economy by reducing taxes consuming 28% of fuel price & place chaotic RAF under administration to lessen its need for fuel levy hikes. Expand Presidential Employment Programme to accommodate 2 million active participants by February s Budget to help young people earn a salary, gain experience & enter labour market. 19
COSATU Budgetary Proposals Enhance invaluable SRD Grant to recover value lost to inflationary erosion by raising it to Food Poverty Line & link its recipients to skills & jobs. Expedite & not freeze badly needed infrastructure investments. Ensure 2 pot pension reforms are implemented in 2024 & increase immediate relief to R50 000 for indebted workers, providing relief for millions & injecting badly needed stimulus into economy. 20
Conclusion If government shows necessary fortitude & vision, & implement these common-sense interventions, economy can meet 4% growth target. This will set nation on path to prosperous job creating economy, a capacitated developmental state & ensure fiscus is set back on a secure path. Workers can no longer afford to live on hope & prayers, whilst Treasury experiments with failed economic theories. COSATU will continue engaging government to seek a more sustainable path to rebuilding state, growing economy & creating jobs. 21
