Finance minister Enoch Godogwana is facing political pushback from the ANC’s alliance partners, Cosatu and the SACP, against the National Treasury’s proposed budget cuts aimed at reining in public spending over the medium term.
Godongwana, along with the chair of the ANC’s economic transformation sub-committee Mmamoloko Kubayi, met party officials and alliance partners on Monday where the finance minister was asked to explain Treasury’s proposed budget cuts.
The plans include hiking taxes and reducing the number of government departments.
ANC spokesperson Mahlengi Bhengu-Motsiri confirmed the meeting, saying the national executive committee’s subcommittee met the minister to discuss fiscal management matters in government. “The delegation included Cde Godongwana. The discussions are ongoing including with our alliance partners,” she told Business Day.
The budget cuts, presented to the presidency earlier in September, come before a crucial election for the governing party in which it is polled to go below 50%.
The party is racing against time to recover from successive electoral losses to remain the majority party in next year's general election.
Part of the claw-back could cause the party to implement populist polices detrimental to the Treasury’s plans to rein in public spending.
Figures released by the Treasury show the budget deficit hit R143.8bn, the largest since 2004 and greater than economists’ forecasts of R115.5bn.
The Treasury proposals come before the presentation of the medium-term budget policy statement in November in which Godongwana is expected to detail the estimated R22bn revenue shortfall for the 2023/2024 financial year and Treasury plans to rein in public debt.
Tense meeting
Business Day understands that Godongwana remained resolute in implementing the wide-ranging proposals, despite pushback from ANC officials and alliance partners at the meeting.
“It was a very tense meeting,” said a source privy to the discussions, which were held at the ANC headquarters in Johannesburg.
The meeting is said to have been attended by ANC secretary-general Fikile Mbalula, Deputy President Paul Mashatile, first deputy secretary-general Nomvula Mokonyane, chair Gwede Mantashe and treasurer-general Gwen Ramokgopa.
President Cyril Ramaphosa and second deputy secretary-general Maropene Ramokgopa were not at the meeting as they are attending the UN general assembly in New York.
“The alliance partners pushed back against retrenchments of public servants and advocated for the government to allow for natural attrition within the public service,” said another source.
“Cosatu said the government should fix Transnet and Eskom before cutting salaries of public servants.”
One of the main bones of contention was the Treasury’s proposal to hike VAT by two percentage points to fund an additional year of the R350 social relief of distress (SRD) grant. The Treasury estimates that the grant, due to expire in March 2024, would cost the state R46.6bn in 2025/2026 and R52.7bn in 2026/2027.
The Treasury allocated an extra R36bn to the SRD grant in the 2023/2024 fiscal year. Civil society groups and social development minister Lindiwe Zulu have been clamouring for the introduction of a basic income grant and the Treasury has been considering the possibilities.
Service delivery
“At least the Treasury is accepting that the government cannot do away with the SRD but people cannot afford the VAT hikes,” said another source who was present at the meeting.
While the SA Federation of Trade Unions was not present at the meeting, its spokesperson Trevor Shaku said the Treasury’s proposals are likely to affect service delivery.
“Our argument is that all posts in the public service institutions such as schools are important and needed. The departments should not be required to submit motivations for why they need posts, as this will delay the filling of posts that desperately need not only be filled, but be increased through creation of new posts,” Shaku said.
“The shortage of headcounts in the public service, coupled with lack of infrastructure and goods, severely compromises the quality of public services. For instance, the overcrowding in basic education is not only a result of the lack of classrooms, but also of a shortage of teachers.”
The ANC had not responded to queries at the time of publication.
Political analyst Ntsikelelo Breakfast said the social programmes are a buffer to prevent social unrest, and it would not be in the interest of the government to remove them.
“Our democracy cannot flourish without the poor being uplifted by the state … the private sector doesn’t have that responsibility,” he said.
“I’m worried that things like crime intelligence have been targeted to save money because that is a security matter and there is a nexus between security and economic development.”
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