Fiscal cliff inevitable on current trajectory – Solidarity

28 October 2020

In its response to Finance Minister Tito Mboweni’s MTBPS, Solidarity today sharply criticisedMr Mboweni who, according to Solidarity, acted more like a magician than a cabinet minister in his speech.

“The figures and assumptions are simply absurd. The simple truth is that we want to spend around R700 billion more than our tax revenue this year, and for the next three years we want to each time spend more than R500 billion in excess of revenue every year. As far as debt stabilisation is concerned, we just have to believe that, magically, it will start to happen by 2026, whereas it has weakened almost annually over the past decade, surpassing even pessimistic expectations,” Morné Malan, a strategic specialist at Solidarity, said.

Solidarity is of the opinion that the Minister’s assumptions are based on a naïve and misplaced trust in the efficiency and honesty of his own party.

Malan explains: “When the Minister of Finance indicates that the only way for a plan to work is that there are no leaks and irregularities, then you should know that there is serious trouble. We cannot simply wish away the tremendous and ongoing corruption this country is experiencing. Similarly, we cannot accept that the same policies of the past 10 years will now all of a sudden begin to work.”

Solidarity also strongly condemned the minister's decision to award a further bailout of R10,5 billion to the South African Airways (SAA).

"This year, our government is spending 50 times more on the SAA than on the total emergency funding for the tourism sector. Furthermore, we are now cutting back on much-needed funds for struggling industries just so that the government can keep this vanity project going. While it is true that the aviation industry is crucial to the South African economy, this is by no means true for this airline,” Malan said.

Solidarity explained that the minister made all the right noises regarding the impact of increased taxes and an increase in spending, but then the government apparently went right ahead with that. 

“Minister Mboweni correctly identifies that an increase in taxes and an increase in spending will do more damage than good to the economy, and yet there are no clear plans to actually cut either of these two,” Malan concluded. 

Issued by Connie Mulder, Head, Solidarity Research Institute, 28 October 2020