Cut state spending only when totally necessary, Fedusa urges

Austerity measures must only be implemented where they cut unnecessary expenditure and only if savings will be used to optimise government programmes to help reduce the overall fiscal deficit. 

This is the view of the Federation of Unions of SA (Fedusa) on the eve of the medium-term budget policy statement due to be delivered by finance minister Enoch Godongwana on Wednesday. 

The Sunday Times reported that Godongwana has warned he will not bear good news. He told delegates at the Kgalema Motlanthe Foundation annual Drakensberg inclusive growth forum that unless spending cuts are introduced, the government runs the risk of running out of money by March 2024. 

“Fedusa appeals with the government to deeply reflect on the adverse impact caused by spending cuts on the public,” the union federation said.

“We have witnessed over the years how the government’s approach, which seeks to rein in spending, has failed to produce the desired outcomes, with the consequences felt in public services and the overall economic stability on the country.”

Fedusa said SA is a developing country with the intention to build a capable state, and that cannot be achieved when public services are continuously in the firing line when there is an economic crisis. 

“The public has barely recovered from the pandemic, and a narrow focus on fiscal adjustments threatens to worsen the cost-of-living crisis many are struggling to survive.” 

Fedusa called on the government to undertake structural reforms to enhance the efficiency and competitiveness of the economy.

“Improving the ease of doing business is at the heart of this, with red tape a hindrance in the running of economic activity. The inevitable result would also be in the attraction of foreign direct investment.” 

The National Development Plan details action required to build the ideal state, Fedusa said, which include reforms necessary for:

• Reducing the cost of living for households and the cost of doing business;
• Removing constraints on growth, investment and job creation;
• Energy generation; and
• Urban planning.

“Although many of these were not accomplished, they remain the rational approach in resolving the economic crisis. The country cannot continue borrowing funds to get out of this crisis. A different approach to revive the economy, through measures as set out in the many plans and policies of the country, must be prioritised immediately.”

Fedusa said it is concerned with the high unemployment rate, which it believes is at the heart of the social distress. “Only when we resolve the unemployment crisis will the quality of life improve for all citizens,” it said. 

There must be no increase in VAT, it said. “Focus must be directed towards the recovery of lost income from corporate tax receipts, which declined by more than 20% year on year in June.” 

The union federation said it expects Godongwana to heed Transnet’s request for a cash injection after the potentially destabilising weakness at the state-owned company.

“However, we expect that the bailout must be accompanied by the strictest conditions so that we do not see a repeat of bailout funds simply being flushed away through corruption.” 

Fedusa is in favour of a basic income grant, it added, which must be increased over time. “Such an intervention must take into consideration the current budget requirements and can be increased incrementally over a period.” 

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