Government Needs to Respond

The following remarks were delivered by the DA’s Shadow Minister of Finance, Dr Dion George MP, during a debate this afternoon on the cost-of-living crisis:

In his Medium-Term Budget Policy Statement, the Minister set out our country’s dire financial situation. A direct result of the ANC government’s ineffective economic policy choices. Our economy is significantly underperforming the 3.3% growth projected for the sub-Saharan region. National Treasury projected 0.9% growth in February, revised it down to 0.8% and the Reserve Bank projects 0.7%. This stagnant growth has resulted in a revenue shortfall, a widening deficit and expenditure has been cut.

This dismal state of affairs was entirely avoidable. Government chose to place itself at the centre of our economy in pursuit of a so-called “Developmental State” that would drive economic growth, generate jobs and lift South Africans out of poverty. The dysfunctional and corrupt ANC government has proven to be incapable of implementing this model.

Nothing highlights government incompetence and corruption more than the fiasco of the state-owned enterprises. After 1994, a fatal decision was taken to “corporatize” them. This meant that they would employ boards and function like other companies but would still be owned by government. This was a giant mistake. Although boards were put in place and paid very lucrative salaries and bonuses, the deployed cadres had no incentive to be efficient. One after the other they failed, and government’s response was to bail them out. Hundreds of billions of rands later, we still do not have viable state-owned enterprises and we never will.

Government chose to implement its cadre deployment programme that employed politically connected individuals to key positions in the public service. That means the best candidate is not selected and the occupant doesn’t do their job without fear, favour, or prejudice. Instead, politics infects service delivery, and the job is not done to serve the people, but rather to serve the party. That is why we have an oversupply of millionaire managers in the public sector and an undersupply of people who can actually deliver the service. That is not sustainable, as the public sector wage bill continues to spiral upwards without any improvement in service delivery and productivity.

Government chose the wrong model for black economic empowerment. The model was sold as a mechanism for broad based black economic empowerment but was the exact opposite. The model made a few people extremely rich and left everyone else behind in poverty.

Battling South African households are feeling the pain of these poor policy choices. As the world grapples with inflation, government can take action to relieve the pressure.

By taxing fuel, the price of petrol increases, that increases transportation costs and then knocks on to the cost of food and more and more South African households are unable to put enough food on their tables.

In the week before his statement, the DA handed a memorandum to the Minister, asking his to respond to the cost-of-living crisis where 81% of households are skipping at least one meal a day; 12 million people go to bed hungry every night; 30% of children under age 5 are stunted in their development and millions of hungry schoolchildren are unable to concentrate and learn.

South Africans are struggling to pay their mortgages, school fees and cannot maintain the lifestyle they have worked so hard to achieve.

Government has simply not responded to this growing crisis. There has been no mention of the action plan that Cabinet mandated the economic cluster to develop to enhance food security and accessibility.

The DA has proposed measures to bring much need relief to battling South African households.

Government can cut the taxes and levies on fuel that currently comprise 33% of the fuel price. This would immediately lower the cost of fuel, the cost of transportation and the cost of food.

Government can implement the very long overdue Pension Fund Reform that will enable members to access a portion of their funds during financial hardship, prior to retirement, as has been successfully implemented in a number of other countries.

Government can grow the economy by positioning itself in the right place in our economy, not at the centre where it gets in the way of growth. Promoting local economic growth requires public-private partnerships; market liberalization; property rights enhancement; trade openness; regulatory streamlining and cutting red tape; labour laws that encourage job creation; scrapping of exchange controls and a VISA system that works.

Government can increase the child grant to the poverty line.

Government can increase the zero-VAT rated basket of goods purchased by the most vulnerable 50% of South African households.

By including additional items such as: bone-in-chicken; beef; tinned beans; wheat flour; margarine; peanut butter; tea; coffee; baby food and soup powder, battling South African households would be able to put more nutrition on their tables.

We have noted that the Standing Committee on Finance has endorsed the DA’s proposal to zero-VAT rate more food items. What needs to be clarified, is whether this will result in actual amendments or whether this is merely election related lip service. We also need clarity of whether VAT on other items will be increased. The DA will not accept any tax increases next year.

Government also needs to clarify the future of the Social Relief of Distress Grant. This was extended as an after-thought without any policy clarity and no effective funding plan. There is no sign of the revised social security plan promised several years ago.

Simply put, government needs to respond.