As a tradition, the Standing and Select Committees on Finance held public hearings on the Finance Minister’s Medium Term Budget Policy Statement (MTBPS). Various stakeholders and interest groups appeared before them and presented their inputs and recommendations on MTBPS.
Most of them commended the MTBPS for acknowledging the fact that our economy is at crossroads. And that corruption is to be blamed for much of its misfortunes. But regrettably, they all disappointed that the MTBPS fell short of stating the extent of our country’s corruption and what needed to be done to combat it, said the representative of the Congress of South African Trade Unions (Cosatu), Mr Nathan Parks. “The MTBPS acknowledges corruption while there is an absence of government anti-corruption plans. And it (the MTBPS) does not state how much was or is still being looted. How much has been recovered. Are there any arrests, convictions or asset seizures?”
But most of all, he emphasised, it said nothing about the R400 million set aside to fund the commissions that probe it. A high cost that our economy can ill-afford.
Apart from that, he presented suggestions on how to cut the government’s rocketing expenditure. Among other things, he suggested that “there is a need to trim down the bloated executives and their perks. Spousal benefits, first class travel, travel allowances – and to trim down the six departmental head offices that cost the government R12 billion.”
As expected, Cosatu made its pronouncements on the bloated Public Servants Wage Bill. He attributed that to the growth in management and policy posts and related perks, while there is a huge vacancy rate on critical service delivery posts.
What perturbed Cosatu most, he said, was the impending retrenchment at the SABC (South African Broadcasting Corporation) which goes against the reassurances by the President and the Minister of Finance, that there won’t be retrenchments in the sector despite our country’s dire economic outlook.
Our country is faced with a political, not an economic problem, said the representative of Fedusa (the Federation of Unions of South Africa), Dr Dennis George. Like Cosatu, Fedusa is of the view that government should “not blame workers for our country’s economic woes. Workers must be allowed to share in the growing prosperity, wages and salaries should increase at a rate equal to the price of inflation plus productivity growth”.
Dr George expressed their worry as Fedusa about the growing culture of inefficiencies at state-owned enterprises, which continue to drain our fiscus at an alarming rate. A rot that has, according to him, driven investors away. “A bold and decisive confrontation of these problems will go a long way into restoring domestic and global investors’ confidence and the sovereign credit rating to investment grade,” he said.
On a more complimentary note, they, as a union, welcomed the President’s Stimulus Package that reprioritises the expenditure and expansion of the healthcare services – and the Clothing and Textile Competitiveness Programme. “Fedusa is pleased that the expansion of healthcare services will result in the creation of 2 200 critical posts across the provinces and the success of the Clothing and Textile Competitiveness Programme which saw exports from the sector grow from R7.1 billion in 2008, to R25.1 billion in 2017, and the opening of 22 leather factories.”
The Organisation Undoing Tax Abuse (Outa) presented inputs and recommendations on a sustainable budgetary policy strategy for South Africa, in response to the 2018 MTBPS. Speaking on taxation levels and revenue collection, the representative of Outa, Mr Matt Johnson, said our economy has reached a point where further increases in taxation would be counterproductive. “Tax levels prevailing between 2014 and 2017 show that a 1% increase in taxation produced only 0.05% in additional real tax revenue. Also, the date shows that each percentile of increase in taxation historically correlates to an average decline in GDP (gross domestic product) of about 0.3%.”
New fiscal anchors are needed, he said, because “the basis of current concern of the credit rating agencies with respect to government finances is not the absolute level of accumulated debt, which now stands at R275 billion. Rather, it is the limited scope that is available for raising further revenue in the form of taxes, excise duties and user charges.”
More alarmingly, he pointed out, is that the social contract between government and taxpayers has eroded. “There is now a trust deficit which has led to budgetary deficits due to perceived and reported cases of corruption and mismanagement of state resources and entities.”
Speaking of which, the Head of the School of Economic and Business Science at the University of the Witwatersrand, Prof Jannie Rossouw, reiterated that a state-owned entity such as the South African Airways (SAA) is a vanity project which could no longer be afforded by the taxpayers. “SAA should have been given away five years ago when it still had value. In the meantime, it has been a massive drain on the fiscus. SAA will now receive its next bailout, and there are no more apologies about that SAA is simply not a viable business venture.”
With few exceptions, tax professionals and economists agree that the most certain and efficient way to create jobs, provide access to land and to stimulate GDP growth is to substitute personal taxes on income taxes and VAT with land tax, said a representative of the South African Constitutional Property Rights Foundation, Mr Peter Meakin. If these committees think that land prices are not state subsidy, then consider an offer of R6 million for the land under our house in 2007, he quipped. “That was 50 times more than its value in 1988. Yet we spent not a one cent nor one once of sweat.”
Meanwhile, he exclaimed, the Consumer Price Index increased by five times in those 30 years. This goes to show that land profits are unearned. “Ironically, during all these 30 years, a large part of my hard-earned salary, interest, dividends and profit was expropriated. The onerous income taxes and VAT reduce the average standard of living of a family of three by R147 000.”
The representative of the Budget Justice Coalition, Mr Neil Coleman, disagreed that the public sector is to be blamed for the rising government expenditure. He is, instead, of the view that “although a useful scapegoat in the face of government’s dearth of new ideas, the public sector wage bill is not the root cause of our problems. The refusal to increase taxes on the rich and corporations is limiting government’s revenue raising and spending potential”.
On the recently pronounced presidential stimulus package, he is of the view that no meaningful stimulus can be funded within the current fiscal envelope. Creative solutions for generating additional revenue are urgently needed, he emphasised. “The Unemployment Insurance Fund (UIF) can be leveraged for a work seeker’s grant for the unemployed. And only around R15 billion of the surplus would be needed per annum from around the current R140 billion, as part of a contribution to such an important initiative.”
A multi-agency work group should be established to curb illicit financial flows that rob our country of much-needed revenue for government’s social programmes, he suggested. “We need a multi-agency work group to target illicit financial flows. And its capacity must be enhanced to detect, analyse, investigate and report suspicious cross-border transactions. This to mitigate the impact of illicit financial flows on our economy.”
In advancing the narrative for creative solutions to unemployment, the representative of Alternative Information and Development Centre, Mr Erwan Malary, suggested that the government should harness the one million climate jobs that the investment in renewable energy can unleash. “State-led investment in renewable energy is an innovative avenue that can be pursued. And has an ability to address both climate change and unemployment. And it could create 80 000 jobs while simultaneously mitigating the impact of climate change.”
For the first time in the history of these public hearings, an emotional appeal by Pietermaritzburg Pensioners, who took a bus to Parliament, was presented to the Standing and Select Finance Committees, pleading to government to double their end of the year old-age grants and to increase their monthly grants. Citing the massive strain their grants are subjected to by increases in the costs of basic consumption goods and services, unemployment and the rising living standards. “We have started this campaign for all pensioners and we will use our time at Parliament and the next several months to universalise this campaign across South Africa, so that all pensioners can be part of this campaign. We are not going to stop until all pensions are doubled in December,” they said.
By Abel Mputing
6 November 2018