THE trajectory of the 2016 Budget delivered by Pravin Gordhan continued to sing to the tune of international and local finance capital, white monopoly capital and credit rating agencies, said National Union of Metalworkers of South Africa (NUMSA) General Secretary Irvin Jim last Friday.
There were some passing references to ‘the challenges of tough economic times and difficult adjustments,’ ‘the retreat of capital’ and ‘emerging patterns of predatory behaviour and corruption’ but nothing about the devastating quadruple crisis of unemployment, poverty, inequality, corruption.
He was obviously trying to reassure capitalist investors – and appease credit rating agencies who have threatened to downgrade the South African economy to ‘junk’ status – by pretending that everything is under control and no radical changes are required to the neo-liberal policies the ANC government has been following for the last two decades, which have so clearly failed.
The Minister’s approach was a continuation of the GEAR strategy, now enshrined in the National Development Plan, for neoliberal, free-market capitalist policies. Notwithstanding the revolving door of finance ministers, Treasury has maintained its neoliberal path through successive annual austerity budgets. The 2016 budget is no different. It contains the hallmarks of austerity, some of which include:
• A reduced budget deficit projected at 3.2% and declining to -2.4% in the medium term;
• Freezing of so-called ‘non-critical vacant posts’ in the public service through which the reduction in the expenditure ceiling of R25 billion will be achieved over the next three years;
• Projected real annual average growth in expenditure to be limited to 0.8% in the medium term;
• Opening the door to privatisation of state-owned enterprises, despite the Minister refusing to describe it as that.
On inequality there was not even the expected token gesture to raise taxes on the very rich, just the incredibly evasive statement that ‘our current taxes on wealth are under review by the Davis Committee’. Within a context of shortfalls in revenue collection it would have been appropriate to finally introduce a wealth tax, with added benefit of reducing rising inequality.
One of the biggest reasons for the massive levels of inequality is the illicit flows of capital to tax havens and what Gordhan himself describes as ‘abusive practices by multinational corporations and wealthy individuals’. Yet the best he can offer as a solution to these problems is a promise that ‘with effect from 2017, international agreements on information sharing will enable tax authorities to act more effectively against them’. This lame statement demonstrates that the ANC government acts in the best interest of capitalists with no political will whatsoever to stem the tide of illicit flows of capital.
But while putting off action to tackle millionaire tax dodgers, there is no good news for the poor. Last year Nene cut the welfare grants budget in real terms by several per cent. In this year’s budget, there is a 6.4% nominal increase for the larger grants: ‘Old age‚ disability and care dependency grants will rise by R80 to R1‚500 in April 2016‚ and by a further R10 to R1‚510 in October.’
So R1505 is the average 2016-17 payment to people, an increase per month of R90 (6.36%). The child support grant will rise by R20 to R350 (up 6.1%). The foster care grant rises by R30 to R890 (3.5%).
Given however the anticipated double-digit food prices, a potential 16% Eskom increase and high transport price rises, inflation for poor people will be more than 10%, so there will be a real cut in living standards, as the increase for the average grant recipient is in the range of 3.5% to 7%.
There was nothing concrete on the long-promised National Minimum Wage, Comprehensive Social Security Plan and National Health Insurance system… The only crumb of comfort is that he took a vague view on the planned nuclear energy deal, which NUMSA strongly opposes. All he said was that ‘Minister Joemat-Pettersson is overseeing our renewable energy, coal and gas IPP programme, and preparatory work for investment in nuclear power.’ Such a half-hearted reference to what President Zuma saw as a key project, suggests that it may also have been put on the back burner.
On higher education the minister did nothing more than Jeff Radebe had already announced. He has given R5.4 billion a year ‘additional’ to the R63.7 billion ‘Post-School Education and Training’ line item.
But this R5.4 billion additional funding is tokenistic compared to the R35 billion a year that even the neoliberal Democratic Alliance has advocated. As even that party pointed out, (the Ministerial Committee) found that South Africa’s budget for universities as a percentage of GDP was only 0.75%, lower than the Africa-wide proportion of 0.78%, the world-wide proportion of 0.84% and the proportion spent by Organisation for Economic Cooperation and Development countries of 1.21%…
The budget is presented within a context of threats of further investment ratings downgrades for the country by international credit ratings agencies, and makes the admission that debt-service costs are the ‘fastest growing category of spending’, with an annual increase of 11.4% over the medium term.
The bulk of this is drawn from foreign funding sources, which leaves us at the mercy of volatile exchange rate fluctuations and foreign interest rates that slavishly respond to the tyranny of credit ratings agencies, thereby increasing debt servicing costs. The time has come to consider local sources of financing.
The Public Investment Corporation (PIC), for example, controls assets worth over R1.8 trillion, the bulk of which is composed of the Government Employee Pension Fund (GEPF), and much of which is ironically invested in foreign financial markets. One of the worst aspects of the budget speech, however, is Gordhan’s frequent references to what he insisted is not ‘privatisation’, but in reality it is.
He reported that Minister Brown is in discussion with Transnet’s leadership on measures to accelerate private sector participation in the ports and freight rail sector. The Budget Review also says government is looking at ‘strategic partnerships’ to allow SAA ‘to draw on private sector capital and technical expertise to improve its performance and expand its network’.
As the Daily Maverick correctly concluded minutes after the speech, ‘Gordhan puts state-owned companies on notice’. NUMSA notes with concern that special economic zones and employment-intensive sectors with export potential have been prioritised for support by the Industrial Development Corporation (IDC). This is however happening at a time when IDC has refused to fund or to buy Evraz Highveld Steel, a plant that employees about 18,000 workers.
If it closes, the whole of Emalahleni in Mpumalanga would become a ghost town like many towns which are victims of deindustrialisation. Why will this government throw money to IDC, which has been spending billions on green field projects for years, but won’t spend money to save so many jobs? If this capacity is destroyed it will never come back?
NUMSA demands the following immediate steps:
1. The Numsa ANC government must nationalise Evraz Highveld Steel or, through the IDC, they must buy it for R150 Million – a drop in the ocean in comparison to splashing billions to green fields and to so-called black industrialists.
2. Numsa calls on the black industrialists who are now swimming in no less than R23 billion to invest their free allocated money in buying this company, as we are completely uninformed as to what they will be investing this huge allocation on.
3. Government must appreciate that our country is facing a national crisis of a job loss bloodbath – a national emergency; action is needed now not tomorrow and in the light of this crisis Numsa demand that government nationalise the steel Industry and the entire value chain in manganese, coal, iron ore and vanadium.
Jim concludes: ‘Numsa reiterates its total opposition to privatisation and all policies whose aim it is to placate white monopoly capitalism and their credit rating agencies.
‘We call on all workers, employed and unemployed, to join us in our United Front, in the work we are involved in to create a new federation, in the work of forming and developing a genuine revolutionary socialist political party of the working class and in defence of NUMSA.
‘This budget, and the ANC government’s commitment to the neoliberal National Development Plan, makes it more necessary than ever to form such a party to fight for the nationalisation of the big capitalist monopolies and the building of a democratic socialist society.
‘Working together, we cannot fail! ‘Organise or starve to death!’
