In light of a significant deficit in the public budget amounting to nearly R57 billion, a financially onerous public service, and a plethora of socio-economic difficulties in South Africa, such as elevated unemployment rates, escalating food costs, and inadequate service provision, Finance Minister Enoch Godongwana delivered a Medium Term Budget Policy Statement (MTBPS) on Wednesday that prioritized business interests. The statement encompassed the disclosure of budget reductions across various sectors.

By Tshawe lama Tshawe

Finance Minister Enoch Godongwana delivered a medium-term budget policy statement (MTBPS) that prioritises business interests and addresses the pressing financial concerns faced by the government.

These concerns include a significant budget deficit of nearly R57 billion, a public service that places a heavy strain on the country’s finances, and various socio-economic challenges such as elevated unemployment rates, escalating food costs, and inadequate service provision.

In response to these challenges, the statement unveiled comprehensive budget cuts across all sectors.

With months left before the governing ANC faces watershed polls next year, Godongwana’s MTBPS has not only been slammed by the opposition, but also by the party’s alliance, Cosatu, which described it as “weak, disappointing, and indecisive.”

Amid the gross domestic product (GDP) debts set to soar from R4.8 trillion to R5.2 trillion in the next financial year, Godongwana proposed:

• Chopping public spending by R21 billion in the current financial year and further plans to cut a whopping R64 billion in 2024-25; and R69 billion in 2025/26.

• Trimming the public service and widening the scope for private-public partnerships in state capital projects and investment.

In what signalled the government’s commitment to cut the public fat, Godongwana called on government departments and state-owned enterprises to respect budget constraints.

Godongwana said the government has made “a strategic decision” to allocate funds to sectors that are personnel-heavy – among them Health, Education and Police Services.

This, he said, would translate into:

• Additional funding of R24 billion this year and R74 billion over the medium term is to be used to fund the 2023/24 wage increase and the associated carry-through costs in these sectors.

• A total of R34 billion was allocated to extend the COVID-19 Social Relief of Distress grant by another year. Over the medium term, a provisional allocation is retained, while a comprehensive review of the entire social grant system is finalised.

• The presidential employment initiative will be extended for another year through the repurposing of a portion of funds from existing public employment programmes such as the Expanded Public Works Programme and the Community Works Programme, with a comprehensive review of public employment programmes underway.

• Additional allocations in the current year for unforeseeable and unavoidable events, with R1.6 billion being made available for disaster relief – including to repair flood damage in various provinces.

Labour federation Cosatu and ActionSA, were among many organisations to slam the MTBPS – seen to have failed to address the country’s socio-economic challenges.

Cosatu national spokesperson Matthew Parks said Godongwana failed to table “a bold MTBPS that would turn a tepid economy around, provide relief to the poor and rebuild the state”.

Government, he said, delivered “an underwhelming accounting note with reckless cuts to budget allocations and below inflation increases to departments – pencilled in over the next three years”. 

South Africa would “not emerge from our crises if we continue to stumble along a path of 0.9% and 1.4% GDP growth”.

Parks: “Our nation is facing a myriad of very difficult challenges – ranging from tepid economic growth, a 42.1% unemployment rate, a youth unemployment rate of 60%, endemic crime, corruption, a painful period of load-shedding, cable theft crippling the passenger and freight railway network; inefficient ports, dysfunctional municipalities, ingrained poverty and inequality.

“We are dismayed by the National Treasury’s decades-long addiction to a variety of economic and fiscal policies that have not succeeded by any yardstick. 

“We should not be surprised when these policies continue to fail in yielding results by any rational person’s yardstick. 

“In 2020, Treasury imposed an ill-conceived wage freeze on public servants. 

“Subsequently, below inflation increases have been affected for public servants

“While we appreciate the real fiscal constraints facing the state and the need to cut fat and reprioritise expenditure, the solutions offered by Treasury of bluntly slashing expenditure and further decapacitating the state in an economy desperately in need of stimulus will only serve to choke the economy and weaken already enfeebled public and municipal services.”

ActionSA president Herman Mashaba cautioned that the MTBPS would “sharply hurt the poor and escalate the cost-of-living crisis”.

“It highlights that the ruling party has run out of ideas to grow the economy and create jobs,

“Combined with reckless spending, this has left South Africa in a dire financial strait, which will disproportionately hurt the most vulnerable members of society, in the face of an escalating cost-of-living crisis.

“The MTBPS will inflict more pain with steep spending cuts, planned tax increases of R15 billion and below-inflation adjustments for frontline services, such as healthcare, policing and education,” maintained Mashaba.

While University of Johannesburg political economy professor, Patrick Bond, said Godongwana’s approach in announcing a R58 billion relief to cover municipal electricity debt was “a major breakthrough”, he warned of implications on the social front.

After the R254 billion Eskom bailout announced in February, there were 67 bankrupt towns – now to gain from the R58 billion, to settle their electricity accounts.

“I hope that means more dynamic economic activity and less pressure to disconnect poor households – although details are not yet available,” said Bond.

He warned: “On the other hand, Godongwana is making ‘real after-inflation cuts to so many social programmes, which are already underperforming.

“This may see a repeat of the mid-2021 social unrest, especially if he remains stingy with the R350 emergency welfare grant – by failing to adjust it for inflation.”

In comparing SA with the Zimbabwean economic decline, Bond said South Africa did not face “the kind of money-printing degeneracy that Zimbabwe went through”.

“However, the opposite danger is acute: with the $4.3 billion IMF loan, followed by several large World Bank loans – putting us under the so-called ‘Washington Consensus’ neoliberal policy thumb.

“What we witnessed today was the main squeeze: fiscal constraint.

“How much people are prepared to put up with a failing state tightening its budget on threadbare trousers, remains to be seen.

“But anger remains at pitch level across society, as water, sanitation, electricity, roads, stormwater drainage and many other services, remain underfunded,” he said.