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The South African government cannot attempt to balance the budget on the backs of the poor – no government can tax itself to prosperity, and the finance minister will have to tackle government spending instead of increasing taxes.
These were the take-outs from the Democratic Alliance’s leader Mmusi Maimane and spokesperson on finance, Squire Lees, on Tuesday, a day before Finance Minister Malusi Gigaba gives his much-anticipated budget speech.
“As a result of a near decade of mismanagement of the country and the economy under Jacob Zuma, our nation finds itself in a very precarious financial situation. With almost 10 million unemployed South Africans – most of which are young people – and over half the nation living in poverty, it cannot and mustn’t be ‘business as usual’ in this budget,” said Maimane.
The opposition party sees tomorrow’s speech to be delivered by Gigaba, as a “blueprint to how President Cyril Ramaphosa’s ‘new dawn’ will take effect”.
“As with the president’s maiden state of the nation address last week … the budget provides the first real opportunity to demonstrate such change,” said Maimane.
Professor André Roux, an economist at the University of Stellenbosch Business School (USB), echoed Maimane’s sentiments stating that, “this year, however, the business end of the budget speech will probably take a back seat to the bigger picture; the still-unfolding political and leadership revolution that is playing out.
By the time the speech is read, President Ramaphosa would have been in power for only a week.
“Nonetheless, South Africa consumers, taxpayers, workers, and business people, as well as international investors and bankers, will be looking at the contents of the Budget Speech for clear evidence of a plausible turnaround strategy,” said Roux.
Addressing the expected tax hikes, including higher value-added tax (VAT), that are being anticipated by economists in Gigaba’s speech tomorrow, Maimane said, “a new dawn requires a new direction in the economy. In our view, this means there needs to be total change to policy direction and spending patterns.”
According to the DA this would aid in growing our economy at a rapid rate that will create jobs and bring in new tax revenue, and also “introduce big, deep, and lasting spending cuts to all the waste and excess in government.”
Maimane stressed that if these changes were to be implemented this would ensure that public funds were directed to delivering basic services and supporting the poor meaning that the government does not need “to hurt the poor through more tax”.
According to the DA, Gigaba – whose position is still uncertain amid talk of an imminent reshuffle by Ramaphosa – must deal with a “six pack” of challenges, including:
• A broken budget process by presenting a credible plan to restore control of the budget process to National Treasury;
• Weak economic growth by presenting a credible plan to boost economic growth from 1.6% to an average of at least 3%;
• A budget blowout by presenting a credible plan to stabilise national debt at a maximum of 50% of GDP;
• State capture by presenting a credible plan to restore public trust in institutions in the “finance family”;
• “Zombie” state-owned enterprises by presenting a credible plan to reform failing state-owned enterprises so that national debt, taken together with contingent liabilities, does not exceed 60% of GDP; and
• Long-term fiscal risks by presenting a credible plan to mitigate long-term fiscal risks such as the nuclear build programme.
The budget will no doubt have implications for the most vulnerable in our nation. With inflation on the rise, and the cost of living increasing, “we are faced with tough choices, and these tough choices must favour the poor and the jobless,” said Maimane.
