SACP statement on the 2015 Budget Speech

26 February 2015

THE SOUTH AFRICAN COMMUNIST PARTY welcomes the tabling of the 2015 Budget Speech by the Honourable Minister of Finance Mr Nhlanhla Nene yesterday, 25 February 2015 in Parliament, Cape Town. The SACP congratulates Minister Nene and particularly welcomes the new section on providing support to public enterprises to drive our second, more radical phase of democratic transformation.

The SACP further welcomes the government's firm commitment on the New Development Bank created by the BRICS countries, Brazil, Russia, India, China and South Africa, with the first regional office of the Bank to be located in South Africa. The BRICS Bank must be developed to become an alternative to the imperialist, Washington-based International Monetary Fund and the World Bank.

The two Breton Woods institutions have for decades ravaged the lives of millions of workers and poor people across the world, more especially in the global South. This has been done by imposing neoliberal policies and practices and creating conditions that caused one crisis after another, including the crisis of 2007-2008 from which the world is yet to recover. 

The budget was presented eight years since the eruption of this biggest system crisis since the "Great Depression" of the 1930s. As the Minister said, "growth is expected to remain sluggish", characterised by "considerable variations in performance between countries" and "economic trends that are likely to be volatile".

In this context, weak domestic economic performance coupled with high levels of public debt has serious implications. This is reflected in the budget, whose expansionary element is unfortunately restricted. However, the SACP welcomes increased allocations, in so far as those were the best possible under the objective circumstances, and we do this with a view of engaging further as the budget process unfolds.

In the prevailing international context, a decline in demand for South Africa's exports, especially minerals, will impact negatively on our economy. South Africa remains significantly dependent on minerals, which are used as inputs in the production of finished goods in export destinations. We come across those products in the market, as imports, but this time at a greater cost.

This colonially-rooted path of dependency and a weak domestic productive base are not sustainable. This is why we need to shift our democratic transformation to a second, more radical phase. This must involve, as we say in our discussion document titled ‘Going to the root', fundamental economic and social transformation, and must help expand state revenue generation to meet transformation and development imperatives.

While noting the negative impact of the global slowdown on "our major commodity exports", on the positive side the budget envisages that "South Africa will benefit from the lower oil prices". However, the Minister stopped short of recognising that consumer goods including food prices remain high, despite declining oil prices. In addition, the reported decline in inflation, which "peaked at 6.6 per cent in June last year" to "4.4 per cent last month" does not mean that prices were reduced. It just means that, with the exception of the (administered) petrol price which has decreased, most prices increased - but at a somewhat slower rate.

The private sector, which dominates our economy, has mostly increased consumer goods prices when oil and fuel prices increased, citing this as a structural factor in the cost of production and transportation. Now, despite successive oil and fuel price declines, those increased prices were not reduced. Instead most prices continue to rise as reflected in Statistics South Africa's inflation monitor. The SACP reiterates its call for an investigation into, and a reduction in the prices of consumer goods. The Party will adopt action in this regard if the private sector remains intransigent.

The SACP notes the main tax proposals which raise personal income tax by one percentage point and adjust tax brackets. The SACP is concerned that, the rich were given tax relief. This is reflected in corporate tax almost completely untouched and in what is referred to as "a more generous tax regime" for business. The Minister should have actually taxed the rich even more to boost revenue and support our development priorities. This is what the SACP is calling for.

The SACP notes the assertion that the financial services sector needs to do more to treat customers fairly. The financial sector is responsible for unsustainable household indebtedness resulting in part, as the Minister acknowledges, "from poor market conduct by lenders and financial advisors".

The SACP however does not believe that engagements between the Treasury and "major banks" alone is the solution to the crisis of household over-indebtedness.  The SACP has called for, and therefore reiterates its call for the convening of a second financial sector summit.  Under the auspices of the National Economic Development and Labour Council, the summit should deal with the crisis of household indebtedness and the transformation of the financial sector's architecture as this is the primary cause of many problems affecting our people and our economy.

The SACP further notes that a "Bill establishing two new regulatory authorities, the so-called ‘twin peaks' reform, will be tabled this year". This is part of strengthening regulations for banks, insurers, derivatives and hedge funds as well as the supervision of large financial groups and collective investment schemes, particularly money market funds.

While supporting the need for strengthening regulations, the SACP believes that the so-called "twin peaks" model is itself a problem and not a solution in its current form. The model has the effect of curtailing the independence of important regulatory establishments such as the National Credit Regulator and subjecting them to the Financial Services Board which is itself an outstanding problem to attend to.

Statement issued by the SACP, February 26 2015

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