After two budgets that announced record spending cuts of R421bn — R156.1bn in 2020 and R264.9bn in 2021 — finance minister Enoch Godongwana’s maiden budget eased some of the pain but continued with the failed austerity policies of the past decade.
As expected, the budget extended the R350 a month social relief of distress grant for one year at a cost of R44bn and allocated R18.4bn towards the presidential employment stimulus for two years.
The main budget revenue estimates for the 2021 three-year medium-term expenditure framework (MTEF) period until 2023/2024 were R469.9bn higher than those in last year’s budget. For the 2021/2022 fiscal year the main budget revenue overrun was R197.4bn. Noninterest expenditure was R63.1bn higher than that budgeted for in the 2021 budget. The difference of R134.3bn was presumably used to repay debt.
This means only 32% of the 2021/2022 revenue overrun was invested in the economy. The Treasury prioritised the interests of bankers above those of the SA people. Over the next three years main budget revenues will increase 4.6% a year to nearly R1.8-trillion in 2024/2025.
But noninterest spending — R282.3bn higher than estimated in the 2021 budget — will increase only 2.1% a year to R1.7bn. The difference between the projected increases in revenues and spending will be used to pay the bankers and achieve a primary surplus.
After inflation there will be a real fall in noninterest spending of 6.6% a year over the next three years. If one also considers the forecast population growth there will be a real per capita decline in noninterest spending of almost 8% a year. The quality of our shocking public services will continue to decline.
Dick Forslund, an economist at the Alternative Information & Development Centre, says real health and education spending will decline 11.8% and 7.1% a year respectively. Section 27, a social justice organisation, said: “The budget continues an austerity path and fails to live up to government’s constitutional obligations by cutting education and health care-funding.”
Despite all the talk about an infrastructure-led recovery, a R100bn fund that was announced three years ago has no money. Every year since 2019 the Treasury has made an allocation to the infrastructure fund that was subsequently cancelled. It remains to be seen whether the provisional allocation of R4.2bn to the fund for 2022/2023 will materialise.
Godongwana delivered his budget within the context of an unviable society that has 12.5-million unemployed people and an unemployment rate of 46.6%. The Treasury has forecast annual average GDP growth of 1.8% for the next three years. By comparison, 153 emerging and developing economies will grow 4.8% and 4.7% over the next two years. This means the government’s recovery plans and structural reforms are just hot air that will not result in a higher GDP growth rate. The unemployment rate will continue to increase during the next three years.
Since it introduced an expenditure ceiling in 2012 the Treasury’s austerity budgets have resulted in a rising public debt burden. Between 2012/2013 and 2021/2022 real consolidated non-interest spending was contained and increased only 1.4% a year. There was no overspending. But the gross debt to GDP ratio soared to 69.5% of GDP from 37.6% over the same period. Since 1994, GDP growth and employment has roughly correlated with the growth of government spending.
Between the 2003/2004 and 2008/2009 fiscal years real main budget non-interest spending increased 10.5% a year. The economy grew 4.8% a year between 2004 and 2008. It created 3.1-million jobs between March 2003 and December 2008. We must stop this pointless austerity and start investing in our people and infrastructure again to bring an end to this neverending economic nightmare. With a growing economy, the debt will take care of itself.
• Gqubule is founding director at the Centre for Economic Development & Transformation.
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