Ahead of his debut budget policy statement and a week after the ANC suffered bruising electoral losses, finance minister Enoch Godongwana is facing pressure from the party’s trade union allies to boost spending.
Labour federation Cosatu, one of the backers that pushed Cyril Ramaphosa over the line to win the ANC presidency in December 2017, wants “a mass stimulus package” to revive an economy that had its biggest slump in a century and lost more than 1-million jobs in 2020, spokesperson Sizwe Pamla told Business Day.
Cosatu wants to see a medium-term budget policy statement (MTBPS) “that will ignite the economy, stabilise the state and provide relief to workers and the unemployed. This MTBPS should be about saving and creating jobs,” said Pamla.
The demands highlight the challenge facing Godongwana — who cut his political teeth as a unionist — between meeting demands for extra spending while convincing financial markets that the government will maintain the discipline needed to contain an increase in debt levels and prevent deficits from spiralling out of control. He is due to present the policy statement — after two delays — on Thursday in parliament.
A surge in commodity prices has eased pressure on the fiscus compared with when Tito Mboweni presented the budget in February, with some economists saying revenues could be about R180bn higher than estimated in February. But SA is still confronted with a growing debt load.
SA has also been helped by a rebasing of the economy, which gave it a higher than previously forecast GDP, meaning a lower debt-to-GDP ratio. But that ratio will remain under pressure from an economy that is likely to suffer more headwinds from the latest bout of load-shedding, while the cost of borrowing is likely to increase as central banks globally reduce monetary stimulus, putting upward pressure on SA bond yields.
The SA Federation of Trade Unions (Saftu) and the Federation of Unions of SA, the second biggest after Cosatu, supported the call for stimulus measures, while economists will be on the lookout for comments on structural measures to boost the economy. Unions also want the government to reverse spending cuts announced by Mboweni in February.
“Austerity measures will not help our economy to grow. You cannot cut public expenditure and reduce levels of investment and then hope that will lead to growth. SA needs a real stimulus package of R1-trillion to kickstart the economy,” Saftu said in a statement.
DA shadow deputy finance minister Dion George said the party would like to hear what Godongwana’s plans are to accelerate a post-pandemic economic recovery and growth.
“The biggest impediment to that are the power failures that we are having right now. There needs to be urgent action ... We want to hear about that,” said George. The DA also wants to hear what Godongwana’s plans are in terms of debt management because “our debt is heading to 88% of GDP”.
Bloomberg reported that economists now see the debt-to-GDP ratio stabilising at 79.2% in the 2027 fiscal year, an improvement on the Treasury’s own estimates in February that it would reach almost 90% in 2026. That is largely due to Stats SA’s rebasing, which found GDP to be 11% bigger than previously estimated.
George said the official opposition will be watching to see if Godongwana says anything on support for vulnerable people, expenditure containment measures, pension fund reform and tax increases.
Ever since the riots and looting that rocked parts of Gauteng and KwaZulu-Natal, the government, which responded by extending the Covid-19 social relief of distress of R350 a month to March, has been under pressure to introduce a basic income grant that business organisations say is unaffordable. With Bloomberg
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