OPINION

Supplementary budget falls far short – SACP

Party says working-class and society needed large scale stimulus package

Preliminary response to the adjustments budget review

26 June 2020

The Political Bureau of the South African Communist Party Central Committee met virtually on Friday, 26 June 2020, on the important occasion of the 65th anniversary of the Freedom Charter. The Political Bureau drew its inspiration from the Freedom Charter in looking at all items on its agenda, including the adjustments budget review introduced on Wednesday, 24 June 2020 by the Minister of Finance, Tito Mboweni. The drafting of the Freedom Charter was anchored in mass mobilisation and its content reflects the input, aspirations and needs of our people, the majority of whom is the working-class and poor. This cannot be said about the supplementary budget review.

The supplementary budget review falls far short of the large scale stimulus package that the working-class and our society desperately needs. This is a concern that the SACP will consistently mobilise around in order to achieve a revolutionary change that provides the society and particularly the working-class with the universal rights to work, water, food, sanitation, housing, quality health-care and a guaranteed income. The SACP will engage with trade unions, community organisation, the youth movement, the women’s movement, the LGBTQI+ community, people with disabilities, the elderly and Left formations to mobilise a broad progressive front for a sustainable recovery and development programme.    

In our recently released document in response to the impact of the coronavirus (Covid-19) pandemic, Sustainable Recovery and Development Programme, the SACP outlined the elements of such a developmental path that benefits the majority of our people.

In contradiction, the stance of the National Treasury and the South African Reserve Bank in the face of the Covid-19 related economic crisis marks out South Africa as a global outlier in the dogged pursuit of austerity. Internationally, most developed and less developed countries are pursuing a range of heterodox macro-economic responses.

In many respects the supplementary budget relied on a sleight of hands. Several of the programmes announced were already funded in the February budget and new funding is only a quarter of the total announced. A significant part of this will come from cuts in other programmes, with most national departments facing 20 per cent cuts on average. The SACP cautions that a zero-based budgeting approach must be used to focus on strategic programmes that benefit the masses of our people.

It is concerning that the National Treasury has cut down some of the Covid-19 package measures recently announced by President Cyril Ramaphosa. For instance, the government had announced R50 billion to support social grants adjustments and the Covid-19 Social Grant Relief. In its supplementary budget review, the National Treasury now cuts the allocation by R9 billion, down to R41 billion. There is also a determination to scale back social grants to pre-coronavirus levels by October, even though all indications point to continued increased income poverty by many households at that time.

The National Treasury drives the scale-back in social grants amid rising unemployment. According to the latest Statistics South Africa’s Quarterly Labour Force Survey, the narrow (‘official’) unemployment rate which excludes discouraged work-seekers increased from 29.1 per cent in the last quarter of 2019 to 30.1 per cent in the first quarter of 2020. This is the highest recorded level of unemployment ever in South Africa, and this figure relates to pre-lockdown levels. Unemployment affects approximately 7.1 million active work-seekers. The total (‘expanded’) unemployment rate covering active and discouraged work-seekers increased from 38.7 per cent in the last quarter of 2019 to 39.7 per cent in the first quarter of 2020. The total unemployed population thus increased and numbered approximately 10.8 million workers in the first quarter of 2020. Retrenchment notices are on the rise as capital, which commands monopoly in our economy, is responding to the impact of Covid-19 through a jobs bloodbath. 

Treasury and the South African Reserve Bank continue to regard our country’s crisis as being a public debt crisis, and not the actual human crisis of unemployment, poverty, inequality and unequal spatial development. There is also an overwhelming concern to contain public debt by limiting spending and pushing a path of austerity. This will take us to a crisis worse than the pre-coronavirus crisis, which the impact of the pandemic is deepening. A path of austerity contradicts the approach called for in the SACP’s response to Covid-19 – Sustainable Recovery and Development document.

The SACP reiterates the proposals contained in its paper, including recognition that the path to fiscal sustainability must be enhancing revenue through promoting structural economic transformation and higher levels of more inclusive economic growth. This programme should be driven by a massive infrastructure roll-out, on a scale sufficient to reduce unemployment, poverty and inequality, and linked to support for manufacturing localisation. South Africa needs a more ambitious, high-impact employment creation industrial policy and support for agricultural transformation, linked with manufacturing – among others through driving agro-processing. Industrial policy interventions should include a transformation of the mining sector towards high value added local manufacturing expansion and raising the levels of national production.

There is also little indication in the supplementary budget review that resources locked away in private and public financial institutions will be released through heterodox monetary policy measures and fiscal policy interventions, including direct SARB purchasing of government bonds, rather than simply focusing on providing liquidity to the commercial (and for profit) oligopoly of private banks. The SACP is calling for a wealth tax, including tax on the huge amounts of liquid cash held in an investment strike. More generally, while there appears to be enthusiasm in Treasury and the South African Reserve Bank for imposing austerity on the majority of South Africans, there continues to be a major failure and little appetite for disciplining capital and dealing with massive illicit outflows of capital from our country.

There seems to be an intention in the supplementary budget review to take on more foreign currency denominated debt. In our Sustainable Recovery and Development document, we warned that unless kept within strict bounds, this path could in fact create vulnerability later on. 

The SACP therefore reiterates its stance on foreign funds, in defence of our hard-won democracy, our fundamental right to self-determination, our independence. Any funds that are accompanied by any conditionality that may either undermine our democratic national sovereignty or usurp our policy space now or in future must not be accepted.

The SACP is particularly concerned by the devastating impact caused by the neoliberal structural adjustment programmes and structural reforms promoted or imposed by the IMF and the World Bank through their lending facilities. The OECD is prescribing similar structural reforms that National Treasuries embedded in neoliberalism simply copy and paste and present as national policies. The SACP is strongly opposed to these tendencies and will also continue pushing the transformation of multilateral institutions.

A comprehensive economic structural transformation strategy is required to turn South Africa around and advance towards the goals of the Freedom Charter. The SACP is strongly opposed to measures that take South Africa in a direction contradictory to the vision of the Freedom Charter.  The structural reforms driven by the IMF, World Bank and the OECD are rooted in the idea that privatisation, disguised in various forms, is a solution, which is actually a problem.

We welcome the fact that the Infrastructure Symposium held the day before the budget signalled an intention to mobilise an infrastructure big push. The SACP will seek an opportunity to acquaint itself with the details of these proposals in due course. In the meantime, we caution against overly optimistic expectations that investment by profit-seeking interests will deliver the kind of a programme we need.

The kind of programmes we need must be very different from private sector-driven projects we are familiar with such as e-tolls, Gautrain and shoddy work done at Medupi and Kusile. We are also aware that “blended finance” models adopted elsewhere have seen huge public subsidies to support private banks floating securities offering high returns to private investors while raising only modest project funding.

Issued by Alex Mohubetswane Mashilo, Central Committee Member for Media & Communications, SACP, 26 June 2020