Workers and the entire country have a lot riding on the medium-term budget policy statement (MTBPS) to be tabled by finance minister Enoch Godongwana in parliament on November 1.
Our nation is facing a myriad of very difficult challenges. These range from tepid economic growth, a 42.1% unemployment rate, a youth unemployment rate of 60%, endemic crime and corruption, a painful period of load-shedding, cable theft crippling our passenger and freight railway network, dysfunctional municipalities and ingrained poverty and inequality. All of these are feeding into a general sense of despair.
Cosatu has been dismayed by the National Treasury's decades long addiction to a variety of economic and fiscal policies that have not succeeded by any yardstick. We should not be surprised when policies that have been pursued over three decades with little success in overcoming challenges such as unemployment continue to fail to yield results.
In 2020, the former minister of finance, Tito Mboweni, imposed an ill-conceived wage freeze on public servants. Subsequently, below-inflation increases have been effected for the public service. Yet the fiscus and the economy remain in a precarious state precisely because the real obstacles to growing the economy have not been addressed: for example, ensuring affordable electricity, reliable rail and efficient ports.
We have been astounded by reckless attempts to impose misguided austerity budget cuts across government in the run up to the MTBPS. Recently, the Treasury wrote to all state institutions instructing them to slash budgets and freeze all vacancies and infrastructure rollout programmes.
While we appreciate the fiscal constraints facing the state and the need to cut fat and reprioritise expenditure, the solutions offered by the Treasury of slashing expenditure and further incapacitating the state when the economy is in desperate need of stimulus and well-oiled public services will only serve to choke the economy, further weaken an already enfeebled government and undermine its ability to provide quality public and municipal services.
What is needed is to grow the economy. That is the only sober and sustainable path to pay down our worrying debt trajectory.
The narrow fixation of the Treasury on cutting the wage bill is a lazy option and one that will not resolve the multiplicity of crises the country is facing. Underpaying a nurse will not get the trains to run on time. What it will do is fuel the brain drain of skilled public servants — including doctors, nurses, teachers, engineers and police officers — packing their bags and moving to better paid and less stressful jobs overseas.
We should not fall for the reckless narrative that says the public service is bloated. In 1994 we had 1-million public servants for 34-million South Africans. Today we have 1.2-million public servants, yet the population has nearly doubled to 62-million. We have seen a dangerous decline in the ratio of public servants to the public.
The crisis we are facing is not an expenditure crisis. The wage bill has been stable at 35% of the budget for more than a decade. The crisis is a collapse in company tax.
This is because of the rapid deterioration in the capacity of Transnet to transport mining, manufacturing and agricultural exports and products to their markets timeously. The mining industry is a major contributor to the state through company taxes, and an earner of investment and foreign exchange for the economy.
If the government does not turn things around at Transnet fast, we will face a jobs bloodbath in the mining industry and a crisis of revenue that no amount of pickpocketing of public servants will fix
If the government does not turn things around at Transnet fast, we will face a jobs bloodbath in the mining industry and a crisis of revenue that no amount of pickpocketing of public servants will fix.
If we are to grow the economy and reduce unemployment, and thus increase the revenue the state needs to reduce debt, then government needs to deal with the real obstacles suffocating the economy, workers and businesses, namely:
- Provide additional support to Eskom to end load-shedding and ensure reliable and affordable electricity.
- Urgently intervene at Transnet and Metrorail to secure and rebuild our freight and passenger railway network and modernise our ports. Transnet has to be the state’s number one priority.
- Stabilise and overhaul dysfunctional municipalities and restore basic services.
- Allocate additional resources to the South African Revenue Service to tackle tax evasion and customs fraud and conduct lifestyle audits of the wealthy to generate badly needed state revenue.
- Fill critical frontline service vacancies in the public services, especially the police, National Prosecuting Authority and courts, enabling them to crack down on crime and corruption.
- Give relief to commuters and the economy by reducing the taxes consuming 28% of the fuel price and place the chaotic Road Accident Fund under administration to lessen its need for fuel levy hikes.
- Expand the Presidential Employment Stimulus to accommodate 1-million active participants by the MTBPS and 2-million by February’s budget to help young people earn a salary, gain experience and enter the labour market.
- Enhance the invaluable Social Relief of Distress Grant to recover value lost to inflationary erosion by raising it to the food poverty line, and link its recipients to skills and job opportunities.
- Expedite, don't freeze, infrastructure investments.
- Ensure the two-pot pension reforms are implemented in 2024 and increase the immediate access of up to R50,000 for financially struggling workers, providing relief for millions and injecting stimulus into the economy.
If the government can show the necessary fortitude and vision to implement these common-sense interventions, the economy can meet the 4% growth target. This will set the nation on the path to a prosperous job-creating economy, a capacitated developmental state and ensure the fiscus is set back on a secure path.
Cutting medication to a patient in the ICU ward at hospital will achieve little besides killing the patient. Workers can no longer afford to live on hope and prayers, while the Treasury experiments with economic theories that have failed and been rejected across the world, including in the industrialised West.
Cosatu is engaging the government leadership to seek a more pragmatic and sustainable path to rebuilding the state, growing the economy and creating jobs.
• Losi is president of Cosatu
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