An Alternative Medium Term Budget Policy Statement to tackle cost-of-living crisis

Dear Editor

Today, the DA presented its Medium Term Budget Policy Statement (MTBPS) for 2023. Our Alternative proposes policy changes that would enable our economy to grow and generate the jobs South Africans so desperately need. Adjustments to Government spending can redirect our fiscal trajectory from the cliff towards more sustainable budgeting and provide urgent relief to battling South African households.

Throughout 2023 South Africans have become poorer and today face the worst cost of living crisis this country has ever seen, as households struggle to put enough food on their tables and millions go hungry. Unemployment continues to rise as business bears the brunt of unprecedented levels of rolling blackouts and rapidly increasing debt is crowding out more and more basic service delivery.

Major reforms are required for South Africa to recover. Reform starts by removing government-imposed barriers to growth. A government that is effective at serving the public, limits regulation and focuses on delivering essential services. This is what will create a dynamic enterprising economy, with market forces and individual freedom at the forefront.

Our 2023 Alternative MTBPS is therefore anchored in five core policy priorities:

1. Establishing the Foundations for Sustainable Economic Growth that Generates Jobs
2. Revitalizing the Electricity Sector to Address Ongoing Power Outages
3. Achieving Fiscal Stability through Controlled Government Expenditure and Debt Reduction
4. Protecting Vulnerable South Africans
5. Fortifying Institutions Tasked with Eradicating Corruption

Establishing a Foundation for Sustainable Economic Growth
South Africa’s fiscal environment remains characterized by an unsustainable level of debt, persistent deficit spending, slow economic growth, stubbornly high levels of unemployment, a deceleration of both foreign and domestic private capital formation, a decline in GDP per capita, escalating living costs, food insecurity, and political volatility. These circumstances are compounded by factors that fall under government purview such as uncertain private property rights, onerous labour market legislation, inadequate national and local governance, and a large and inefficient public sector dominated by monopolistic state-owned enterprises.

To establish resilience and stimulate economic growth the Alternative MTBPS proposes innovative solutions to attract foreign capital, encourage domestic savings, revitalise state-owned entities, fix our crumbling infrastructure, enhance labour market participation, and facilitate the expansion of both the small and large business sectors.

Boosting the energy sector and providing pragmatic solutions to blackouts
Throughout 2023 South Africa has seen unprecedented blackouts. The instability of the energy supply in tandem with a volatile political climate has had a severely detrimental impact on the advancement of South Africa. By maintaining its monopoly over the energy sector, the government has subjected every South African, with the notable exception of Cabinet members, to an exploitative energy regime which enforces controlled blackouts at will and crushes economic growth.

Through the implementation of the DA’s energy sector reforms, the delivery of sustainable energy supply will be accelerated. Accordingly, the DA reiterates its call for the unbundling of Eskom and the opening of the energy sector to Independent Power Producers (IPPs), and in the interim, Eskom must prioritise the streamlining of its procurement processes while letting in private capacity to power a growing South Africa. By opening the energy sector, innovation and voluntary action will keep the lights on and the wheels of the economy moving towards the growth rate needed to address declining economic participation.

Managing Gross National Debt and Government Expenditure
Government has opted to implement a redistributive policy framework, which has necessitated a significant increase in expenditure. To secure the funds necessary to finance this expenditure, the government has resorted to the accumulation of debt. However, it is imperative to note that the ability to repay a loan, including both the principal and interest, is contingent upon the borrower’s capacity to generate wealth. Unfortunately, the economic agenda of the ANC has demonstrated an inability to serve as a wealth generator. Instead, the state, under the ANC’s leadership, operates as a consumptive entity, continuously extracting resources from the true wealth generators of society, namely individual workers, and private sector businesses, thereby undermining the wealth generating capacity of the economy.

To address this the DA’s 2023 Alternative MTBPS is therefore anchored on a framework of fiscal prudence that prioritises the attainment of the primary budget surplus announced in February. Our focus concurrently lays the foundation for economic expansion and job creation.

The DA’s economic policy suite, when implemented, will accelerate the stabilisation of national debt, and achieve fiscal consolidation. This can only be accomplished through catalysing and cultivating robust economic growth that surpasses the expectations under the current administration.

Supporting Vulnerable South Africans
The economic climate in South Africa exerts a disproportionate burden on low-income and marginalized communities. This was intensified by the COVID-19 pandemic and extended lockdowns. The situation is further exacerbated by global economic volatility and domestic policies that hinder economic participation while inflating the cost of living.

With the savings realised from the DA’s targeted spending and savings, as well as the implementation of the DA’s policy framework targeted at uplifting poorer households, the DA commits to protecting increases in social grants and extending the Social Relief of Distress Grant, currently not budgeted for from next year.

Our Alternative MTBPS sets out several affordable proposals for tax relief. Given the current cost of living emergency, fuel taxes and levies must be refused , and an expanded zero-rated VAT food basket must be considered now, and not deferred.

Commit to the Bolstering of Corruption Busting Institutions
The 2023 Global Organised Crime Index (GOCI) shows that South Africa now ranks 7th in the world out of 193 countries and 3rd in Africa for mafia-style criminal networks and organised crime syndicates.

The systematic degradation and hollowing out of South Africa’s law enforcement agencies has transformed the country into a haven for organised crime syndicates who are threatening to overrun every sector of the economy.

Government’s proclaimed commitment to bolster institutions responsible for combating crime, such as the National Prosecuting Authority (NPA), the Special Investigating Unit (SIU), and the Financial Intelligence Centre (FIC), has yet to be fully realized in terms of financial allocation. Despite the unresolved state capture crisis and the critical role these institutions play in addressing corruption and other specialized and organized crimes, the 2023 February Budget, much like previous budgets, has not provided significant relief to these perennially underfunded agencies.

The announcement of South Africa’s greylisting underscored our eroding credibility as an emerging market that is plagued by regulatory lapses and corrupt activity. Our greylisting has further signalled to the global economy that South Africa lacks the capability and determination to effectively address systemic organized crime and high-level corruption and serves as a warning to international market participants of the potential risks associated with engaging in transactions with South African companies and individuals.

Conclusion
Our economy is in serious trouble, a direct result of government’s failed economic policies.

Economic growth is stunted by a burdensome regulatory environment, a deficient skills base and low labour market participation rates, a shrinking tax base, overburdened public and private infrastructure, diminishing fixed investment, and alarmingly high levels of crime.

Given this situation, it is imperative that immediate and decisive action is taken. The failing ANC government is unwilling and unable to act. It is incompetent, incapable, and positioned in the wrong place in our economy. The ANC’s inclinations to expand its regulatory reach is fundamentally incompatible with cultivating a business-friendly environment that can attract vital capital, accelerate economic growth, ease the debt burden, and create the job opportunities necessary for lifting millions of South Africans out of poverty and despair.

South Africa deserves a government that can unlock its limitless potential. That government is the Democratic Alliance.

Regards

Dr Dion George MP
DA Shadow Minister of Finance