SACP Initial Statement on the 2023/2024 Financial Year National Budget

22 February 2023

The Minister of Finance Enoch Godongwana delivered on Wednesday, 22 February 2023, the 2023/2024 financial year Budget Speech and tabled related Bills amidst the multiple crises of the capitalist system and neoliberal policy failures characterised by persisting high levels of unemployment, poverty and inequality, as well as the energy crisis, to name but a few. It is the workers and poor, the majority of our population, who above all else the crises severely affect. The real test facing the national budget and the policy assumptions underpinning it is whether it will be different in its outcomes compared to the previous ones that have cumulatively failed to overcome these and other problems. Below, we set out some of our initial observations.

Maintaining and improving the Social Relief of Distress Grant, towards a universal basic income grant

The SACP has called for and therefore welcomes the extension of the Social Relief of Distress Grant. Beyond this, we call on the government to not terminate this grant at the end of March 2024. The government must extend this grant further.

Since its introduction at the height of the COVID-19 pandemic in 2020, the Social Relief of Distress Grant has lost a portion of its original value because of inflationary erosion. Beyond extending it, the government must improve the Social Relief of Distress Grant. This must lead to the grant becoming a foundation to build a universal basic income grant. 

Industrialisation

The National Treasury should know de-industrialisation has affected the South African economy since the 1980s. De-industrialisation continued post-1994, gaining a new momentum under the auspices and legacy of the neoliberal economic policy called Growth, Employment and Redistribution (GEAR), which the government unveiled in 1996 as “cast in stone” and “non-negotiable”.

Following its adoption of GEAR, the government rapidly liberalised the semi-peripheral, underdeveloped South African economy, imposing the shock therapy in line with the announcement it had made, that it intended to surpass the liberalisation commitments made in the Uruguay Round of trade negotiations. As de-industrialisation unfolded, the colonial feature of dependency on imports of finished products increased. A fall in manufacturing contribution to national output accelerated after the 2008 global economic crisis. Manufacturing contribution to employment recorded the largest negative growth. 

Yet, in the Budget Speech, Minister Godongwana does not assert the imperative to turn the tide against de-industrialisation through a new, favourable macroeconomic policy framework that will adequately support industrialisation as an employment creation driver. The scant reference under the “Just Energy Transition Investment Plan” to “a coherent industrial policy to enable innovation and economic diversification” is devoid of adequate resourcing and asserting industrialisation as a transformation and development driver.

In fact, as the “Budget Review 2023” indicates, the average annual Medium-Term Expenditure Framework growth for economic development and incentive programmes is negative. That is –0,5 per cent. It is unthinkable that South Africa will achieve industrialisation under the policy path that has failed to industrialise the country’s economy for 26 years since the adoption of GEAR.

The post-COVID-19 pandemic recovery that President Cyril Ramaphosa referred to in the State of the Nation Address earlier this month and Minister Godongwana referred to in the Budget Speech is uneven and not inclusive. For example, in the third quarter of 2022, South Africa had a total population of approximately 12 million active and discouraged work-seekers within its borders. Persisting high levels of unemployment, poverty and inequality continue to be the lived reality of millions of the workers and poor, mostly the youth and women, with Africans the worst affected.

Under this context, we would have expected to see a robust and sufficiently ambitious programme to drive inclusive recovery, transformation and development through industrialisation support at scale.

Infrastructure development and security

Infrastructure development, maintenance and security is a key employment driver and crucial to support the development of domestic productive capacity.

While we welcome the commitments to infrastructure development and security, the figures mentioned on this score are unconvincing at the moment, given the magnitude of the multiple crises that we face.

The energy and Eskom debt crises

We have been expecting the government to announce funding measures to help resolve the Eskom debt crisis, at least since 25 July 2022, when President Cyril Ramaphosa addressed the nation on the energy crisis. The President correctly said the Eskom debt continued to be a huge burden on its ability to address its many challenges. He said the National Treasury was working to finalise a sustainable solution to the Eskom’s debt and the Minister will outline how the government will deal with this matter effectively when he presents the Medium-Term Budget Policy Statement in October 2022.

We are now clearer not only from the above but also from the text of the Budget Speech by Minister Godongwana that Eskom has been held back by the inability to access financial resources to maintain its power stations adequately, to original equipment manufacturer specifications. In making the announcement of its debt relief now in February 2023 (not in October as President Ramaphosa promised in July 2022), the Minister mentioned as one of the conditions Eskom should focus on the maintenance of its existing fleet of electric power generation stations to improve the availability of electricity. This means that the lack of access to funds up to now has impeded Eskom’s ability to maintain its power stations. In the view of the SACP, this example of fiscal consolidation, the euphemism for austerity, has prioritised financial considerations over its impact on the real economy and households across the country.

As things stand, it remains to be seen whether the total debt-relief arrangement inclusive of the R254 billion announced by the Minister will be sufficient to support Eskom to maintain its power stations to original equipment manufacturer specifications. We will therefore watch closely whether the measures announced today will make any appreciable difference going forward.

When referring to Eskom prioritising capital expenditure, Minister Godongwana only mentioned “transmission and distribution during the debt-relief period” as its focus areas. This is worrying, as it excludes the developmental imperative for Eskom or the state through the same or an additional public utility to rapidly increase its productive capacity to generate electricity to meet the growing energy needs of the people.

Rooftop solar power units

The tax allowance announced by Minister Godongwana on rooftop solar power panels excludes the workers and poor who cannot afford to buy and pay for the installation of the household solar systems on their rooftops. This is designed for the well-off and the rich.

The elitist exclusion of the masses not only goes against the SACP’s call for the state to cover the workers and poor through a rollout of the household solar power system, anchored in localisation to contribute to industrialisation and employment creation, but also contradicts the emphasis made by President Ramaphosa during the State of the Nation Address, that government interventions to achieve recovery from crises and advance development are designed to leave no one behind.  

The productive capacity of the state, not least in state-owned enterprises

The productive capacity of the state, not least in energy, and other state-owned enterprises, should be greater now and going forward than going back. We need greater productive state capacity as part and parcel of increasing the total productive capacity of the nation as rapidly as possible to take care of the material needs of the people, the majority of whom are the workers and poor at this point in time.

The obsession with the Washington Consensus styled microeconomic liberalisation without revitalising the productive capacity of the state is a serious cause for concern. This is driven by imperialist hegemonised institutions such as the IMF, World Bank, OECD and western credit rating agencies, to name but a few, with a tendency to undermine democratic national sovereignty through their policy prescripts. Uncritical national treasuries and central banks which have been embedded in neoliberalism drive the agenda. This is coupled with the repeated idea that macroeconomic policy should deliver stability against the evidence from other places that it has increasingly been used as a tool for recovery and development, including industrialisation.

Also, the emphasis that has emerged on the funding made available to state-owned enterprises is for, and on, those in distress, a direct result of neoliberal policies and state capture.

The call that the SACP has repeatedly made for a regular flow of public funding to expand the role of development finance institutions in providing support for industrialisation has, once again, fallen on deaf ears.

The SACP maintains a critical stance against privatisation of state-owned enterprises. We will scrutinise what the government means in practice when it refers to restructuring state-owned enterprises.  

Resource transfers from the developed Global North to support a just energy transition, mitigation and adaptation in Global South countries.

It is quite correct that the developed world—by far the biggest polluters and main causers of human induced climate change historically—should be expected to provide resources to the Global South to support a just energy transition and both mitigation and adaptation.

The SACP supports the government’s stance, stressing that the developed Global North countries should do more to support the energy transitions of the developing Global South countries—especially by ensuring that the financial support has grant funding as a larger proportion, as opposed to loans.

Public service bargaining

In identifying the factors that have “mainly driven” government spending to exceed revenue since 2008, Minister Godongwana mentioned “the public service wage bill”, along with “rising debt-service costs and transfers to households”. It is as if public servants are doing nothing valuable but driving an increase in government spending through their wages and wage increases. It is also as if social protection in the context of the meagre increases in social grants is a burden.

Meanwhile, the Minister left out the negative impact of austerity on growth and consequently on government revenue as a serious problem.

The SACP calls on the government to engage in meaningful, consensus-seeking negotiations with public service trade unions on behalf of the workers and avoid undermining public service collective bargaining through budget processes.

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