Finance Minister's budget is too conservative to deliver REAL jobs

Note to editors: The following speech was delivered in Parliament today by the DA Shadow Minister of Finance, Tim Harris MP during the consideration of Fiscal Framework and Revenue Proposals. 

Honourable Speaker,

Following this year's budget speech the Minister of Finance, Pravin Gordhan, received credit from analysts and commentators for several aspects of his budget, and I will echo three of them:

The Minister expressed the right sentiments by underlining how government needs to work with the private sector, and move to implementation on the National Development Plan (NDP);

He reassured ratings agencies by tabling a budget deficit figure that was an improvement on forecasts; and 

He introduced an "expenditure ceiling" and projections for cost containment by saving on items like "catering, entertainment and venue rental." 

Overall, some analysts were relieved that it was a "conservative" budget.

We have to ask ourselves, however - when 7 million South Africans are unemployed, and we have the highest unemployment rate amongst middle-income countries, is a conservative budget good enough?

When our economy is growing at less than 2% per year, while other emerging markets are growing at 4-6%, is a conservative budget good enough?

The Finance Minister avoided these awkward questions, and stayed on message for the governing party's election campaign when he tried to suggest that this budget should be judged by the fact that our country is better today than it was at the end of Apartheid. 

Of course, that is not really debatable, is it? We have all acknowledged that things are better today than under Apartheid. 

The real question for South Africa is how this administration has performed over the past five years and whether the budget before this House is strong enough or brave enough, to take us out of the economic doldrums.

No member in this House would deny that the global financial crisis had a central role to play in the short-term deterioration in our economic performance in 2009, and the Minister described this in great detail in his speech.

What he did not describe is how South Africa, unlike most other emerging markets, suffers a double crisis: the global financial crisis on the one hand, and a crisis of political leadership on the other.

While our economy grew at 1,9% last year, other middle-income economies like Peru, Malaysia and Chile have recovered to growth rates between 4% and 6%.

While political leaders in other developing countries responded to the global financial crisis by implementing reforms to make their economies more competitive, our leaders muddled along, tabling contradictory economic plans and refusing to take on vested interests right at the top of government.

That is why average annual GDP growth has dropped from 4.2% under President Mbeki to 2.8% under President Zuma. The President himself acknowledged in a speech today that "this growth... has not been adequate to meet the objective of reducing unemployment substantially."

Because the bottom line is that there are 1.4 million more unemployed South Africans today than there were when President Zuma took office. 

Honourable Speaker, the only way we can really measure this Budget is by asking two questions: "Does it do enough to help our economy to create jobs?" and "does it do enough to accelerate economic growth?"

I think the answer to both of these questions is "no". And that is why we cannot support this budget.

Because if you dig a little deeper, even the aspects of the speech that I welcomed a few minutes ago are problematic:

It is all very well for the Finance Minister to make the right noises about the NDP each February, but South Africans have seen that government does not listen to him and neither is the implementation forthcoming;

The main reason we hit a lower budget deficit figure is because the provinces underspent by R6,7 billion, reflecting deep problems in the capacity of ANC-run provinces

It is not clear that this government will comply with the Finance Minister's cost-containment measures. Recent indications suggest they will not. Earlier this year North West Premier, Thandi Modise's bought herself a R1.3 million car.  Also last year Mpumalanga Premier David Mabuza bought himself Audi A8, a BMW X5 and a Range Rover. And the budget for this years' presidential inauguration has been increased to R120m - a 60% increase on what we spent for the last inauguration.

Honourable Speaker, if we dig even deeper we see other structural problems with this Budget.  

Every year we are told that government debt, as a proportion of GDP, will "peak" in three years. But "peak" means it is meant to come down afterwards, so why has last year's peak of 40% in 2015 changed to a new 'peak' of 44% in 2016. 

This raises serious questions about long-term sustainability when we already spend one rand out every ten on debt repayment.

There has been much fuss about the R1 trillion spent on infrastructure over the past 5 years. But the NDP says we should be spending at rates that should have seen more than R1, 5 trillion spent. In this budget the minister claims R847bn over 3 years is enough, but if we're going to hit that 10% of GDP target in the NDP we need we should be spending R1, 2 trillion.

And, while the Minister pays lip service to the NDP, the actual implementation on issues that really matter has not happened. Why are we not holding teachers accountable for their performance? Why have we not seen the regulatory reform we need to boost growth? Why have we not overhauled the public service to hold government employees accountable for their work? Why are we increasing barriers to trade and investment rather than lowering them?

Honourable Speaker, it is clear that implementation has not happened because the ideological enemies of the NDP are many, they sit at the highest level of governments, and the President is not prepared to take them on. 

That is the reason that South Africa does not have confidence that the good sentiments expressed each year by the Finance Minister will translate into real action by government.

It is the reason why, despite being the largest economy in Africa we are not benefiting from African economic growth of 6%. 

And the reason why, despite having the worlds' largest endowment of mineral resources, mining has contracted by 0,5% per year for the past three years.

Honourable Speaker, it is also the reason we believe this budget is too conservative to tackle unemployment and slow growth, and is the reason why we cannot support the Fiscal Framework

I thank you. 

Issued by Tim Harris, DA Shadow Minister of Finance, March 11 2014

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