South Africa: Nehawu Response to the 2020-21 Medium Term Budget Policy Statement

press release

The National Education, Health and Allied Workers' Union [NEHAWU] notes the tabling of the 2020/21 Medium-Term Budget Policy Statement by the Minister of Finance, Mr Tito Mboweni. The delivery of the budget comes on the heels of the delivery of the economic reconstruction and recovery plan by President Cyril Ramaphosa on the 15th October 2020.

NEHAWU feels vindicated today that South Africa under the stewardship of Minister Mboweni and his coterie of untransformed, intransigent, orthodox, neoliberal economists and bureaucrats in Treasury are incapable of driving a progressive economic reconstruction and recovery plan that can help South Africa to survive the economic, health and social devastation that has been brought about by the COVID-19 pandemic.

This underscores our belief that anything short of massive stimulus to the tune of R1 trillion per annum financed through domestic resources sourced mainly from the Central Bank and Development Finance Institutions and Pension funds will militate against government central policy goals of positioning the economy for faster, broad-based economic growth, through a state-led infrastructure recovery, whose aim is to deliver the National Health Insurance [NHI], comprehensive social security and broad based industrialization.

The intended cuts of R60 billion in 2021/22, R90 billion in 2022/23 and R150 billion in 2023/24 mostly from the public sector wage bill is continuation of the onslaught by government and Treasury on our members and workers. We remain steadfast and we will do everything possible to force government to honour the last leg of the 2018 wage agreement including the permanent employment of Community Healthcare Workers, the payment of a risk allowance or motivational incentives for frontline workers and the filling of all funded vacant posts. We are perturbed and disappointed by the fact that after the President pronounced the absorption of healthcare workers as a response to the burden on our healthcare system, however, up to so far there is still no clear allocation from the budget to finance that absorption.

A destructive anti-ANC manifesto macroeconomic package

The Fiscal policy framework proposed by the 2020/21 MTBPS is destructive, unrealistic and anti-workers and the poor who are the core motive forces of the National Democratic Revolution [NDR] as led by the African National Congress [ANC] and its Allies. It also militates against the economic reconstruction and recovery plan that was tabled by the President a week ago. Furthermore, it proposes an austerity package disguised as fiscal consolidation which was never agreed upon by social partners in NEDLAC and it proposes the following:

· To reduce the fiscal deficit and stabilise the debt-to-GDP ratio over a five-year period;

· Large fiscal adjustments and an improved narrow budget deficit of 7.3 percentage points of GDP over the medium-term expenditure framework (MTEF) period, and by an additional 1.8 percentage points in the subsequent two years. The aim is to reach a main budget primary surplus by 2025/26;

· Relative to the 2020 Budget, the provincial equitable share will be reduced by R60 billion in 2021/22, R85.6 billion in 2022/23 and R64.1 billion in 2023/24;

· Transfers to local government will be reduced by R17.7 billion, including R14.5 billion from the local government equitable share, R2.7 billion from the general fuel levy and R569 million in direct conditional grants;

· Lower estimated spending by the National Skills Fund and sector education and training authorities of R2.8 billion in 2021/22, R2.7 billion in 2022/23 and R0.9 billion in 2023/24;

These austerity measures are draconian and anti-working class and the poor which will lead to the collapse of service delivery and weaken the state capacity to deliver services especially to poor communities and the rural areas. They have a huge potential to undermine social cohesion and will lead to social strife to pit the ANC-led government against its core constituency and ultimately lead to the demise of our glorious movement. This is why we call upon the ANC National Executive Committee [NEC] to call the Minister of Finance into order.

NEHAWU is deeply annoyed and takes this reactionary austerity measures as a frontal attack by Treasury on the hard won gains of workers and poor communities. It is our firm view that the Minister of Finance has ceased to advance the national interests of our society because he is forever hell-bent on serving the interest of international finance institutions, domestic financiers, international rating agencies, thugs who want to loot SOE's and our network industries.

The blended finance model that the MTBPS is proposing is a perfect vehicle to enrich finance capital to the detriment of our developmental goals.

The debt management strategy that is centred on reducing public sector wage bill and the reduction of head counts underscores the point we have been raising that Treasury has run out of ideas. Treasury has been sterile and regressive. It is responsible for the mismanagement of South Africa's economic policy, and the recovery path it is proposing is a route to destruction and it is suicidal.

This is demonstrated by the failure of the Central Bank to use monetary policy tools to respond to South Africa's sovereign debt. Other countries have used monetary policy tools effectively to manage their debt. For example the Central Bank of Japan holds 85% of Japan public debt, and this has been achieved through monetary financing. NEHAWU is deeply disturbed by the fact that the SARB continues to sit over R900 billion reserves that it could use these to finance the economic reconstruction and recovery plan including contribute to an infrastructure led recovery.

NEHAWU views the in-action by Treasury and its failure to impose capital controls including the failure to regulate cross border capital flows as treasonous and a betrayal of national interests.

Expenditure Priorities

The proposed 2020/21 measures to repurpose and reprioritise spending plans are devoid of reality and economic rationality. They are a recipe for disaster and will militate against any meaningful economic reconstruction and recovery. We are deeply opposed to the large spending reductions to the provincial equitable share formula, because these will weaken our public health response to the COVID-19 epidemic, and will roll back the gains towards the implantation of NHI as a vehicle to deliver universal health care.

The Treasury proposes the following:

· Significant spending reductions to the tune of R304 billion

· Consolidated government spending will grow below inflation at 1.6%

We welcome the following allocations:

· R23 billion for Eskom.

· R6.5 billion for South African Airways (SAA) for settling its guaranteed debt and interest;

· R84.7 million to the Independent Communications Authority of South Africa for the licensing of high-demand spectrum.

As NEHAWU, we would like to it state categorically clear for the record that we remain opposed to the unbundling of ESKOM and the intention to finally sell it to the highest bidder. We will continue to mobilise workers and the poor communities to oppose any attempt to hand over state assets to private hands. Whilst we note the meagre allocations to the Presidential employment interventions, we are of the view that the massive cuts that Treasury is proposing to line departments will cost the ANC its legitimacy, credibility and votes from the electorates in the coming local and national elections because the ANC has reneged on the promises it has made through its electoral manifesto.

NEHAWU will continue to mobilise society and all progressive forces against this reactionary, counterrevolutionary austerity measures that are unleashed on our members and the society at large by Treasury.

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