After four months, in its first budget, the “government of neoliberal unity” (GNU) has thrown in the towel and said it cannot do anything about the country’s unemployment crisis.
The Treasury’s monomaniacal focus on public debt, and the relentless fearmongering about it, has trumped everything in the GNU’s lame statement of intent, which is so vague it can be interpreted to mean anything.
The 2024 medium-term budget policy statement (MTBPS) had no underlying national vision for GDP growth and jobs. Every page in the budget was about cutting costs, reprioritising and squeezing efficiencies, in a country in which infrastructure and public services are collapsing after 12 years of austerity and structural reforms during which per capita real noninterest spending has declined about 1% annually.
The mobilising national vision, which must unite all South Africans, is to cut national debt. But there is no universe in which SA’s debt burden is high by international standards. According to the IMF’s fiscal monitor publication the world’s average debt-to-GDP ratio is 93%. Almost every country had an increase in public debt after the pandemic. The average for advanced countries is 109.4% and the average for 155 emerging market and middle-income countries is 70.8%.
Even if the ratio was high, with forecast primary budget surpluses of R326.6bn during the three-year 2025 medium-term expenditure framework period, a R1.7-trillion gross borrowing requirement over the same period, inevitable spending overruns and predicable revenue shortfalls in a weak economy, it will be impossible to reduce the debt burden. The primary budget surpluses are politically unsustainable and will continue to suffocate the economy and increase the debt burden.
The most sustainable way to reduce a debt burden is to grow the economy and create jobs. Since the government is a large part of the economy it cannot cut its way towards higher GDP growth. The budget will not achieve its GDP growth forecast of 1.8% a year for 2025-27 because it is based on an implausible increase in gross fixed capital formation (GFCF), a measure of investment. GFCF has declined for four consecutive quarters and the Treasury forecasts it will decline 2.5% during 2024.
Since 2018, when Cyril Ramaphosa became president, public investment has collapsed by 22.5% and total investment by 8.9%. The MTBPS says nothing about reversing the crippling public sector investment strike. The strategy to boost private investment is the equivalent of a prosperity church pastor who asks members to pray harder and have faith that the “god of the market” will bring more riches. The strategy is full of intangibles the effects of which cannot be measured.
For the past 12 years the Treasury has overestimated the benefits of its structural reforms and underestimated the costs of austerity, which reduces GDP growth. This time, Operation Vulindlela’s strategy hinges on one sector — renewable energy. But there was a 56% collapse in the registration of embedded generation facilities at the National Energy Regulator of SA. The sector has high imports, which creates jobs in China, and weak domestic value added.
The GNU is doubling down on the ANC’s failed economic policies of the past 15 years, which were the main reason for its electoral collapse. On this trajectory, with annual GDP growth of 1.5% a year for the next five years, the number of unemployed people will increase by 2-million to 14.4-million during the first quarter of 2029. The unemployment rate will increase to 44.6% from 42.6%. South Africans should never support any budget that does not care about jobs, which should be the priority.
The GNU has created the economic conditions for its own collapse. If it continues to refuse to address the jobs crisis South Africans must punish the parties in the GNU and do to them what the people of Botswana did to the BDP, its liberation party, during last week’s election shocker.
• Gqubule is research associate at the Social Policy Initiative. He writes in his personal capacity.
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