The DA has called for a comprehensive three-month review of government spending to tackle the Treasury’s widening budget shortfall, rejecting tax hikes or additional borrowings and putting its strategy in sharp contrast to the bigger coalition partner, the ANC.
“We need a three-month emergency spending review which must be undertaken to identify wasteful and failing programmes. This will allow the reallocation to fund essential public services such as healthcare, policing and education,” DA finance spokesperson Mark Burke said at a press conference on Tuesday.
His comments come a week after the cabinet refused to sign off finance minister Enoch Godongwana’s budget presentation, which had pencilled in a two percentage point VAT rate hike to 17% to plug a budget shortfall of 5%, or nearly R600bn.
The government of national unity (GNU), in which the ANC and DA are leaders, met on Monday to discuss the Treasury’s budget, which, according to News24, showed how the fiscus raised about R86bn through spending cuts on departments that include health and education.
The DA’s stance is in sharp contrast to the ANC proposal, which according to three sources who spoke to Business Day, includes a proposal to introduce a wealth tax — a proposal that won praise from social justice activists in a country with deep-seated inequalities but raised worries of an exodus of the wealthy for friendlier tax jurisdictions.
Also speaking on Tuesday, ANC secretary-general Fikile Mbalula said the ANC, which has been dishing out an expanding basket of support to the poor and the middle class in the name of social transformation for virtually all its time in power, is opposed to any spending cuts.
“The minister is caught between a rock and hard place. We don’t believe in cutting spending. As the ANC we would not agree. We need to meet people’s basic needs. The budget is not just a budget; it is a political tool,” Mbalula said.
But the DA said that SA’s tax base was too small to absorb further tax increases without harming private sector investment and the economy.
“Tax increases, including a mooted wealth tax, will chase away investment, shrink our tax base and ultimately cause damage to the economy,” Burke said.
Instead, the DA has proposed cost-cutting measures such as a 33% reduction in travel and catering expenses across departments, a 12-month hiring freeze for all nonessential government positions and a national audit of “ghost employees” to eliminate fraudulent salaries.
The first in a series of special cabinet meetings, which are aimed at resolving the impasse over how to confront the Treasury’s projected budget deficit, began this week. The meetings are expected to continue until March 12, when Godongwana is scheduled to table the budget speech in parliament.
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