A budget of missed opportunities, says DA

Trade unions and political parties have described finance minister Enoch Godongwana’s budget speech as a "missed opportunity" to address SA’s pressing socioeconomic needs.

“The truth is that there is nothing bold about this budget,” said Dion George, DA shadow minister of finance. “The minister has failed to announce any meaningful structural reforms that could drive economic growth, incentivise domestic savings, attract foreign capital and protect vulnerable South Africans.”

The Treasury has budgeted for an average annual increase of 3.3% in the public sector wage bill over the next three years, mainly due to the carry-through costs (R45.6bn) of the 2022/2023 wage increase. It acknowledges that this is a risk to the fiscal framework as public sector trade unions have resisted below-inflation wage hikes. Other risks are low or no economic growth, rising borrowing costs and the replacement of the social relief of distress grant with an unaffordable alternative.

On the spending front, the Treasury expects consolidated non-interest expenditure will contract at an annual average of 1% in real terms because there will no longer be transfers to Eskom.

Edgar Sishi, the head of the Treasury’s budget office, emphasised that there will be no cuts to departmental budgets. Consolidated government spending will grow at an average annual rate of 4.5% to R2.48-trillion in 2025/2026.

In a statement on Wednesday, George said the budget “completely ignores the country’s mounting debt problem, and in fact adds to it”.

“It offers no solution to revitalise state-owned enterprises or address the energy crisis. The minister has missed an opportunity to bolster domestic savings by increasing the tax free savings limits, amongst others,” he said.

Gross tax revenue of R1.69-trillion is projected for 2022/2023, R93.2bn higher than the figure projected in the 2022/2023 budget. Part of this higher-than-expected revenue will be used to reduce debt. Revenue of R1.787-trillion is expected for 2023/2024. The tax to GDP ratio rises from 25.4% to 25.7% over the next three years.

George said no steps were taken to encourage foreign capital investment through further relaxation of exchange control.

“To help the most vulnerable South Africans, the minister could have easily dropped fuel levies and increased the zero-VAT rated food basket, without any impact, given the tax overrun. He also announced no measures to cut back on unnecessary, wasteful government spending. This reveals an uncaring government that is out of touch with the daily hardship of South Africans households,” George said.

He said the minister’s announcement of bailouts for failed state-owned enterprises (SOEs) “is a clear misallocation of public funds”. SA Revenue Service (Sars) is allocated additional funding of R1.5bn to strengthen tax administration and collection and combat the illicit economy. An amount of R2bn is allocated for the refurbishment of parliamentary buildings destroyed by fire. Further proposed bailouts of R1bn to SAA to assist with the business rescue process and R2.4bn to the SA Post Office to implement its turnaround plan.

“This pales in comparison to the mother of all bailouts - the offloading of over R250bn of Eskom's debt onto our sovereign balance sheet,” he said, adding, however, that the official opposition party welcome incentives to provide for solar installations through introducing a tax rebate.

“This budget speech does not offer bold action and fails to address the urgent economic crisis facing SA.”

SA Federation of Trade Unions (Saftu) national spokesperson Trevor Shaku said Godongwana was "lying" when he said the budget is not an austerity budget.

"The budget has nominally cut R245m from health department for 2023/24, social security is nominally cut by R1bn in the 2023/24 and will be cut by R22.5bn in the medium term, and home affairs [budget] will decline by R625m. Except for economic development and community development, all other departments’ budgets are cut in real terms over the medium term. By this proof, this is still very much an austerity budget," Shaku said.

Cosatu spokesperson Sizwe Pamla said: “Treasury needed to use this budget to abandon its current austerity approach of subordinating all the socioeconomic challenges that the country is facing to the narrow focus on its primary budget surplus and debt-containment targets.

"This budget proves that they are going to continue to wage an austerity war against public servants, amongst whom are the brave and hardworking front-line health and care workers that have seen the country through the most catastrophic period (Covid-19) in terms of public health emergency in democratic SA.”

Pamla said rather than “choking the economy with austerity measures”, the government needed to implement policies that support economic growth.

The economy is forecast to grow by 2.5% in 2022, 0.9% in 2023 (down from the 1.4% in the medium-term budget policy statement (MTBPS) forecast), 1.5% in 2024 and 1.8% in 2025.

Pamla said Cosatu, which is part of the ANC-led tripartite alliance, applauded the “excellent work” by Sars as it exceeded revenue collection by R93bn.

“This is proof that a well-capacitated and properly led state entity can deliver results. It is now clear that despite the rhetoric from ANC and government leaders around building a capable developmental state, our state continues with the neoliberal trajectory of outsourcing and agencification, which especially at the provincial level has severely weakened service delivery. This budget remains committed to the reduction in personnel headcount in the public service as vacancies are closed and attritional retrenchments are effected,” Pamla said.

Build One SA (Bosa), a political start-up led by former DA leader Mmusi Maimane, characterised the budget as a “bailout given to the ANC government in an attempt to plaster over its numerous and wide-ranging shortcomings and failures in government”.

“Billions were given to stave off local government collapse, service government debt, and bailout Eskom instead of providing relief to citizens feeling the heat of high levels of inflation, stagnant earnings and a cost of living crisis,” Bosa spokesperson Sbu Zondi said.

“The budget completely missed the mark on this score, leaving millions of citizens struggling to make ends meet, trapped in poverty and joblessness and without hope for a better future. There were no tax exemptions, no relief on sky-high energy costs and no reduction to the R90bn fuel levy. People cannot eat Eskom bailouts, energy transitions or infrastructure agencies. Much more was required to ease the burden on every South African,” he said.

“A budget geared towards growth was required, yet in terms of economic growth and job creation, the budget was sorely lacking. With just 1% of the budget allocated to job creation and labour affairs (R26.4 billion), government is paying lip service to the country’s most pressing need. SMMEs were skimmed over, despite their role to create the overwhelming majority of new jobs.”

North-West University Business School economist Professor Raymond Parsons described the budget speech as a “surprise-free, pragmatic, and credible response to a challenging set of global and domestic economic circumstances”.

He said Godongwana, “although enjoying some windfall tax-revenue gains, still had a difficult balancing act, given the political and economic constraints within which he had to shape fiscal policy. SA’s public debt remains high and is set to stabilise at 73.6% of GDP in 2025/26 — three years later and at a higher level than projected in the 2022 MTBPS.”

“Fiscal risks, therefore, still exist over the next few years. These risks broadly arise from factors such as the management of the major Eskom debt-relief framework, the final outcome of the public sector wage negotiations, and ultimately the impact of low GDP growth on tax revenues. Several major state-owned enterprises also continue to rely heavily on government bailouts. Higher tax revenues depend on sustained future investment and economic growth,” Parsons said.

He said SA’s future growth prospects were now less dependent on fiscal policy “than on the ability of the rest of the cabinet to implement the economic and energy reforms needed to give SA much higher job-rich growth”.

mkentanel@businesslive.co.za