DA presents its own Medium-Term Budget – which includes a R168 billion cut to the public wage bill

Finance minister Tito Mboweni will on Wednesday 29 October, deliver his second Medium Term Budget Policy Statement (MTBPS), and his first of the new administration.

Analysts and economists believe it may be the most important budget for South Africa to date.

Adrian Saville, chief executive of Cannon Asset Managers, noted that with a resurgence of load shedding, crisis-level unemployment figures, and economic growth teetering between zero and one percent, government is quickly running out of time and options to address the country’s challenges.

And opposition party, the Democratic Alliance, said that Mboweni’s number one priority must be to present a credible plan to prevent a blow-out of the deficit and to stabilise the national debt. This is will require deep spending cuts, it said.

Geordin Hill-Lewis, DA shadow minister of finance, said: “This must be the primary goal of the speech if the government is to retain (and hopefully, reclaim) credit worthiness and the global credibility that is so central to attracting investment. Equally important, this must be the goal of the speech if the government is to save essential public services from collapse.”

The DA presented what it termed “a credible plan to stabilise the deficit and the national debt over the next three years”.

The political party, which is battling a leadership crisis, said its plan meets this target by achieving a net adjustment of R235.85 billion over the Medium Term Expenditure Framework (MTEF) period, including R168 billion in cuts to the public wage bill.

“During the past year, the government has shown itself unable to make decisions. The government has been ambitious in commitments to reform, but largely inconsequential in action,” said Hill-Lewis.

“As a result, the economy is not growing nearly fast enough to make a dent on poverty and unemployment. We expect growth projections to be revised downwards again. This also means that revenue targets will be missed, as VAT and corporate receipts collapse.”


Unemployment

The DA pointed out that South Africa now has 10.2 million people who are looking for work or who have given up looking for work, nearly 600,000 more than at this time last year. This only exacerbates revenue shortfalls, as personal income tax receipts collapse, said Hill-Lewis.

“Growth, and only growth, can get South Africa out of the vicious fiscal cycle it is now in. If we are to save the public services that the poor and the public-at-large depend on, the Minister and the President must realise that they can no longer continue putting off the difficult decisions needed to turn around the economy.

“The delay in implementing real economic reforms to get the economy growing means the government now faces a stark choice. Either it can save basic services, or it can save public sector jobs. It is no longer possible to do both,” the politician said.


Public Wage Bill

“For far too long, government has avoided a difficult discussion with public sector unions about the cost and composition of the public wage bill. It is time for decisive moral action in the interests of the country,” said Hill-Lewis.

He said that the centre of the DA’s proposal is a deep cut to the public sector wage bill over the MTEF period.

“We have done detailed work on this proposal in order to best ensure that (1) essential frontline public services are not affected, and (2) as many jobs are saved as possible,” he said.

The DA proposes a R168 billion cut to the public wage bill over the next three years:

  • A 3-year freeze on all non-occupation specific dispensation (frontline) wages, saving R138.6 billion over three years
  • Reducing the number of the most highly paid head office management staff in the public service by approximately 9,200 posts, saving R29.4 billion over three years

The DA said it minimises these cuts by proposing further revenue raising mechanisms and cuts to other superfluous programmes:

Once-off mechanisms

  • Auctioning digital spectrum would raise R32.5 billion
  • Selling Telkom shares would raise R14.5 billion
  • Selling Sentech would raise R1.8 billion

Additional cuts over MTEF period

  • Eliminating New Development Bank funding would save R13.25 billion
  • Eliminating National Health Insurance funding would save R5.8 billion

SOE Bailouts

The financial crisis within South Africa’s state owned entities are well documented, led by Eskom, whose debt threatens the sovereign rating of the country, while SAA has received bailouts for years and continued to fail.

It is morally indefensible to cut public jobs, basic services, infrastructure investment and support for the poor, just so that government can continue to bail out failing State Owned Entities (SOEs), said Hill-Lewis.

“The cuts required over the medium term are so deep, that it is unlikely that basic services and infrastructure spending will not be affected. Indeed, this is the path of least resistance politically, although it also has the most devastating effect on the poor,” he said.

The crisp question is: how can government continue to justify subsidising air travel for the privileged, through SAA, while cutting basic services to the poor? How can it continue to justify making the public pay exorbitant electricity prices, while protecting a failing business?

“This government must now clarify its policy on continued state ownership which is manifestly not working.

The minister should announce that SAA will be placed under business rescue, and that SA Express be shut down forthwith,” Hill-Lewis said.


Read: South Africa may lose Moody’s stable outlook

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DA presents its own Medium-Term Budget – which includes a R168 billion cut to the public wage bill