Labour has called on the government to table a decisive and progressive medium-term budget policy statement (MTBPS) on Wednesday to address a slew of socioeconomic crises buffeting one of Africa’s largest economies.
“An economy stumbling along with a sluggish 1% growth rate, witnessing a rising unemployment rate of 42.6% and higher for youth, entrenched levels of poverty and inequality, embattled public and municipal services, ailing state-owned enterprises, and endemic crime and corruption cannot afford a tepid business-as-usual approach,” Cosatu parliamentary co-ordinator Matthew Parks said.
Finance minister Enoch Godongwana is set to table the medium-term budget in parliament on Wednesday, in which he is largely expected to again commit the government to further fiscal consolidation and keeping spending in check.
Parks said: “Government needs to use the MTBPS and the pending 2025/26 budget as a turning point to marshal every possible resource, including overcoming the private sector investment strike, to ensure we fix the state, grow the economy and slash unemployment. We do not have limitless time and should not simply pray for better times.”
He said the most sustainable and sober path to manage and curb public debt is to stimulate economic growth, spur job creation and ensure the state can provide the quality services and support that society and the economy depend on.
“A growing economy and workers in jobs will generate the tax revenue the state requires to fund its constitutional developmental mandate and reduce its debt levels. Slashing budgets does not address the causes of a stagnant economy, in fact it worsens the crises as it starves the economy of badly needed stimulus and further cripples essential public services with brutal cuts,” Parks said.
Stabilise municipalities
Among other key interventions, Parks said the government needed to ramp up stimulus for the economy by ensuring the R943bn infrastructure programme is spent well and devise comprehensive turnaround plans for struggling state-owned enterprises such as arms manufacturer Denel, public broadcaster SABC, the Post Office and Postbank.
The state should intervene urgently to stabilise and rebuild struggling municipalities, invest in front-line public services by filling critical vacancies, tackle corruption and provide relief to the poor and working class.
The SA Revenue Service (Sars) needs to be allocated funds to boost tax compliance and ensure all, “in particular the wealthy, pay the taxes needed to enable the state to provide the quality public services the working class depend upon”.
Free Market Foundation head of policy Martin van Staden said: “If government wants to restore the confidence of the taxpaying public it needs to act swiftly to rein in out-of-control spending, particularly on public sector wages, provide some tax relief and rid the government balance sheet of uneconomic, costly state-owned enterprises.”
Van Staden added: “We believe that there is scope for real reform after the 2024 general election, but it is incumbent on government to turn goodwill into action. The medium-term budget policy statement and the February 2025 budget are two of the last ‘easy’ opportunities the GNU [government of national unity] will have to announce a reform agenda, before the expectation that the next five years will just be ‘more of the same’ is solidified.”
Organisation Undoing Tax Abuse (Outa) CEO Wayne Duvenage said: “This MTBPS will be the first section of the budget under the GNU and it will be interesting to see if the new cabinet has influenced a change in budget priorities. Outa hopes that minister Godongwana will send a strong message that bailouts to noncore state-owned companies (such as SAA, Denel, state mining companies, PetroSA and others) will not be tolerated.”
He said Outa would like to see the reduction of budgets in “unnecessary spending areas such as VIP protection for ministers and blue-light brigades and, instead, to see more funds assigned to the various sectors within the criminal justice system such as the National Prosecuting Authority, SA Police Service, Special Investigating Unit, Sars and institutions like the public protector and the auditor-general”.
“Outa believes that for every R1bn invested in effective rebuilding of structures that drive a concerted effort in the fight against corruption, we could see 10 times that amount as a return in higher tax collections, in more excise duties by challenging illicit trading, and in improved business confidence which will result in the growth of tax revenue and employment,” Duvenage said.
Inclusive growth
North West University Business School economics professor Raymond Parsons said: “Though the broad fiscal parameters of the 2024 medium-term budget are usually broadly set by the main budget in the previous February, the GNU’s first MTBPS will nonetheless now also need to capture the shifts in SA’s political economy since then.
“Some of the new ‘political capital’ available can be used to take the right decisions on SA’s economic road ahead. The 2024 MTBPS should therefore reflect the GNU’s overarching commitment to a much higher job-rich, inclusive growth for SA,” Parsons said.
“Compared with February, things are looking more positive and need to be capitalised on. The MTBPS should therefore project a confidence-building fiscal and economic strategy that builds on the policy momentum created by the GNU, as well as the tangible evidence of an incipient economic recovery.
“If it plays its cards well [the] GNU’s MTBPS will have more room to manoeuvre in striking the right balance between growth-enhancing measures on the one hand, and the need to stabilise the still challenging high debt-to-GDP ratio on the other, over the next three years.”
Parsons noted tough decisions still had to be taken in the medium-term budget, especially on the spending side, “but eventually all fiscal roads lead through a higher growth rate. To this end the MTBPS must be based on growth assumptions that are positive, realistic and credible”.
“This means that the emphasis in the medium-term budget must be on investment-led growth and in creating an overall economic environment that will make SA a preferred investment destination. Backing for faster growth-friendly structural reforms must therefore be an important part of the MTBPS message.”
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