COSATU response to the 2020/21 Budget Speech

27 February 2020

COSATU notes with extreme disappointment the underwhelming and provocative 2020/21 Budget tabled by Minister Mboweni in Parliament today. COSATU and millions of workers had hoped to hear a clear diagnosis of the problems, a road map to address them and an end destination in today’s budget speech.  Tragically, all we have seen is an attempt to dump the bill for industrial-scale looting on public servants.

This feeble and inflammatory budget is a clear message to workers that the battle lines are drawn and the attempts to shift the burden of the crisis to them is in full swing.

 Economy

Workers were hoping to hear of a stimulus plan to kick start and grow the economy.  We had hoped to see a shifting of funds to support the government’s progressive industrial strategy and sectoral master plans. The federation had hoped to hear clear plans, resources, and targets to reduce unemployment. 

We had hoped to hear positive reports on the Investment Summits and the impact of the investment drives. Astoundingly, there is little within the budget on these key issues.

COSATU does welcome the commitment to increase infrastructure expenditure.  We welcome the efforts of the Department of Trade, Industry, and Competition to revitalise industries. 

We take note of the commitment to table various legislation to grow the petroleum, gas, minerals and transport sectors and SOEs.  The release of the Public Procurement Bill is long overdue but given the extent of our economic crises, it is deeply worrying to note the lack of urgency with regards to fast-tracking these legislative interventions.

State-Owned Enterprises

The one alarming aspect of this Budget is the discovery that the government has no clear and concrete plans to stabilise and revive our key SOEs. The incessant lamentation might be therapeutic, but it cannot be regarded as a strategy. Comprehensive turnaround plans are needed as a matter of urgency. We are pleased with the initial steps taken by the new CEO of Eskom to begin cleaning up the mess.  The initial green shoots in Denel are also noted.

Revenue

The federation appreciates that government-provided inflation-linked tax relief for working- and middle-class families. However, the federation believes that the government should have honoured the commitment made by the Minister for Finance in the October MTBPS to progressively reform taxes. 

This should have been done to plug tax loopholes and to increase taxes upon the wealthy through a combination of tax bracket adjustments, income tax, company tax, inheritance, and estate duty taxes, luxury goods and imports.  This would have helped provide additional revenue to the fiscus.

The delay in implementing the Export Levy on Scrap Metals undermines the commitment made by the government at Nedlac to ensure that it comes into effect in the 2020/21 tax year.

It is disappointing to note that government has no will to force the business sector to end its investment strike and embrace the COSATU’s proposals to invest in South Africa and our economic future. Instead, the government continues to prop up corporate welfare, where the private sector receives incentives but fails to reciprocate.

Public Service Wage Bill

COSATU finds the government’s continuous attacks on public servants silly and tiresome. Little recognition is given to the conditions facing public servants, like being overworked and underpaid.  

These public servants support on average seven unemployed extended family members. The fixation with the wage bill is nonsensical when considering the fact that it has been stable for the past 10 years at 35% of the government consolidated expenditure, in line with international standards. 

The headcount has been declining in the past few years as posts have been frozen. The freezing of these critical service delivery posts have resulted in one nurse performing the work of six nurses, doctors working 48-hour shifts, increasing teacher-learner ratios and an overwhelmed police service.

COSATU is ready to engage the government on measures to stabilise the public fiscus. These include reducing bloated executive and management posts and perks, placing public sector entities and enterprises under a single public service and sector collective bargaining process, eradicating ghost posts, consolidating state entities and municipalities and filling of critical front line service delivery posts and possible reskilling and redeployment of staff as needed.

The President’s decision to freeze salaries for Ministers does not go far enough. It is poor leadership of politicians that led us into this crisis.  They must lose their exorbitant salaries and perks.

Workers will not play victims and the government can rest assured that they will demand and not beg for what is due to them. COSATU remains battle-ready to pushback against this public service cuts agenda.

Expenditure

One of the most inexplicable aspects of the Budget is that it fails to deal with corruption and wasteful expenditure.  The Auditor General estimates that 10% of budgets are lost to corruption and wasteful expenditure annually. Yet the budget does not indicate what is being done to stop the bleeding. This raises the question of what is the point of attacking workers and ignoring the looters?

COSATU had hoped to see a shifting of funds away from non-critical areas to ones that would support economic growth, industrialisation, job creation, and service delivery.

Departmental Allocations

There is little relation between the Budget and the progressive commitments made by the President in SONA two weeks ago.

The SONA committed to building three (3) new universities, seven (7) new colleges, and fast-tracking the NHI.  Amazingly these are ignored in the budget.COSATU does welcome and support the progressive pronouncements with the Sovereign Wealth Fund in the Budget.

The federation welcomes the allocations to ensure all schools have sanitation, but the budget fails to tackle the rising teacher-learner ratios. The budget does not indicate how the government will intervene to halt the collapse of two dozen municipalities.

The announced delay in implementing the NHI is worrying. SONA announced the employment of an additional 7000 SAPS, but the budget speaks to reducing SAPS by 5000.

The land restitution allocations and targets are inadequate. The planned water infrastructure investments are welcome but the lack of attention to investing in water recycling and conservation is reckless.

Way Forward

Under the current economic circumstances, the purchasing power of the working class is continuing to shrink. As sales shrink due to the absolute fall in working-class incomes, production shrinks and jobs continue to be lost. This process will endure and becomes self-reinforcing unless measures are put in place to arrest the decline in workers’ incomes and to pave a way for recovery through stimulation.

According to this budget government does not have a plan to deal with the capital’s negative withdrawal strategy which is characterised by the ongoing capital or investment strike. This has seen South African businesses refusing to invest their profits in the productive investment, as well as continuing capital flight.

Companies continue to shift their primary listings overseas. Aided by the relaxation of exchange controls, the large companies continue to relocate their operations or setting up new operations on other continents. The obvious mantra they have adopted is , invest less and mechanise more.  

Big resource companies have set up major operations to beneficiate raw materials produced in South Africa and this suggests a conscious refusal to cooperate with the government’s strategy of broadening the base of the economy, until certain conditions are met. What is happening to the Mining Charter and the Debt Relief law is a reminder of the ongoing pushback from the private sector.

The little of the FDI that we saw came from mergers and acquisitions. Most of it has been speculative and short term which flows rapidly in and out of the country depending on the vagaries of the market. There is no commitment to stopping illicit outflow sand capital flight.

We remain constructive partners and we will work with the government when it is ready to fix the economy but for now, we have a responsibility of defending the workers from this neoliberal onslaught.

We will continue to explore viable alternatives to help the country break free from this hostage situation and the blackmailing tactics of big business. These include implementation of prescribed asset requirements, requiring certain portion of retirement and other funds to be invested in socially productive government bonds.

Imposition of capital controls to regulate capital flows and tax on speculation. Taxes to encourage productive investment, and reinvestment such as a higher rate of tax on dividends. Taxes aimed at discouraging capital intensity and promoting labour-intensive investment.

Issued by Sizwe Pamla, Cosatu National Spokesperson, 27 February 2020