NEWS & ANALYSIS

Mboweni failed to present a plan to stabilise debt – GHL

DA MP says we'll soon be spending more on interest than we spend on education and healthcare

Debate on Report on the 2019 Revised Fiscal Framework

13 November 2019

When Minister Tito Mboweni delivered his Medium Term Budget Policy Statement last month, South Africa saw (perhaps for the first time) just how badly things have gone wrong.

I commend the Minister for being honest about the state of our public finances. He did not hide or varnish the facts.

But ultimately his mini-budget must be judged on whether it achieved its main purpose. The Minister’s primary task, really his only job, was to present a credible plan to stabilise the national debt.

The fact is, by any objective measure, he did not achieve that.

The Minister did not present a plan to stabilise debt at all.

His budget sees the deficit blowing out to 6.5% next year, and national debt ballooning to over 71% of GDP in 3 years’ time.

By that time, we will have borrowed another nearly R1.5 trillion, and we will be spending R300 billion every year on interest.

The view that this mini-budget was simply inadequate was confirmed by a 30 basis point spike in bond yields, and by Moody’s decision to place us on “negative watch” for downgrade.

To be sure, the Minister did identify R50 billion in spending cuts. The point is that despite these cuts, overall expenditure is still going up, and there’s a simple explanation for that.

That is because the spending cuts are more than offset by huge bailouts to zombie state owned entities (SOEs).

Every budget involves direct trade offs.

But we believe the 2019 mini-budget represents a fundamentally unethical set of trade offs.

The real story of this budget is that basic services on which the poor depend are being cut for the simple reason that for this government, that is the path of least resistance.

It is easier to cut basic services to the poor than it is for the ANC to take on the public sector unions.

Today NUMSA and the cabin crew union (the SACCA) tell us they will “shut down SAA” if planned job cuts go ahead.

May I just say to them parenthetically: Thank you, and please go ahead! We’ve been calling for SAA to be shut down for years. If you’re volunteering to do it for us, please go ahead! In fact, we should all join them on the picket line.

If this strike goes ahead, it will be a key test for the government. Will they cave to union pressure, or stand firm in doing what is right and fair for the whole country?

That concept, fairness, is often invoked in our politics. We all often pledge fealty to creating a fairer society.

For the DA, creating a fairer society is one of the values that underpins our approach to government.

From the brave stand taken our antecedent party, the Progressive Party, whose formation exactly 60 years ago today we celebrate, we have always sought fairness for those cut off from opportunity and dignity.

So how do we square the ANC’s commitment to a fair society with the trade off choices made in this budget:

Is it fair to cut R50 million from cervical cancer tests for Grade 5 school girls, to protect the bloated public service?

Is it fair to cut R40 million meant for eradicating pit latrines in schools, to protect 15 000 supernumerary Eskom employees?

Is it fair to ask millions of South Africans to pay higher electricity prices, higher VAT, and higher fuel prices, to pay for the effects of years of mismanagement and cadre deployment in the state?

Is it fair to to make the domestic worker pay for a bailout to SAA, while she can only dream of one day affording an air trip on that airline?

Is it fair to make the unemployed mother pay for the free higher education of the middle class while that mother cannot afford to send her own child to creche?

Is it fair that police stations do not have rape evidence collection kits, but 29 000 millionaire managers in the public service have got salary increases of 9.3% a year for the last decade?

These are the real trade offs this government has chosen to make, and they are simply ethically indefensible.

These choices are not only unfair and wrong, they are also financially unsustainable.

In recent days, we have heard the argument that the solution is to borrow even more, in the vain hope that spending more will boost growth.

Even the Parliamentary Budget Office (PBO), which should be giving MPs responsible and credible advice on the budget, has shamefully propagated this argument.

This argument is well-worn, but ludicrous. Every rand we borrow requires more rands in future interest payments. That’s fine when national debt is low and interest payments are not crowding out basic services. But those days are long gone in South Africa.

The fact is that in the next few years, we will be spending more on interest than we spend on education and healthcare. We will be spending triple on interest than we spend on policing.

It is like using your credit card to pay the interest on your overdraft, and then going to Capitec to loan more money to buy groceries.

This is the path of certain economic destruction, and we must not go down it any further.

And I’m pleased that we all agree in the Finance Committee that we cannot possibly continue down this road. In the report which we are now debating, the Committee expresses itself clearly and strongly that this path is unsustainable, and that Treasury must do more to cut costs and bring down debt. [See at para 6.7 of the Report]

We need big, bold decisions to save our essential public services from collapsing under the weight of our public debt.

That is why the DA has proposed a credible plan to cut R168 billion from the public wage bill by focusing cuts on the 29 000 millionaire managers in the civil service, while protecting the true heroes of the civil service: nurses, teachers and front line delivery staff.

We have proposed a 3 year wage freeze for millionaire managers, and a head count reduction of 9200 non-front-line staff.

These savings would rein in the deficit, bring down debt, and free up funds that we would otherwise spend on interest, for investment in critical infrastructure or social protection.

This is the only credible plan on the table, and we hope the Minister will consider it seriously. He will have the support of this whole House if he does so.

Issued by Geordin Hill-Lewis, DA Shadow Minister of Finance, 13 November 2019