The South African Federation of Trade Unions (Saftu) on Thursday alleged that massive cuts in public expenditure and public investment will not grow the economy. 

Finance Minister Tito Mboweni delivered his 2020 Budget speech yesterday and announced cuts of R156-billion relative to the 2019 Budget baseline for the coming three years, a sizeable portion of which would be derived from cuts to the public-sector wage bill.

The proposed expenditure baseline cuts are equivalent to about 1% of gross domestic product a year and include collective reductions of R261-billion to the 2022/23 fiscal year, including a R160.2-billion reduction in the wage bill of national and provincial departments and national public entities.

Saftu said government had presented a Budget whose main principle was an attempt to solve the economic crisis on the back of the working class.

“Indeed the working class and the poorest of the poor were placed in the frying pan and the heat underneath was increased,” said the union.

It pointed out that a greedy capitalist class had caused “economic havoc” and this was now being taken out on the working class.  

“This philosophy will not help the country break the backbone of poverty, unemployment and inequality. More dangerously, an austerity programme based on a government driving down its expenditure or its contribution to investment in the economy will hasten even worse unemployment, poverty and inequality,” said Saftu.

The union explained that massive cuts in public expenditure and public investment will not grow the economy, stating that the public sector created a third of gross domestic product.

It further added that a 1% cut had a huge impact on growth, with levels of investment by the private sector plummeting.

“The billionaires and multi-millionaires are hoarding over R1.4-trillion of investible cash. They are refusing to invest it because our monetary policy rewards owners of financial assets with high interests rates, so as to maintain an inflation target policy of between 3 and 6% and to allow exchange control liberalisation. This encourages the rich to put their money in the banks which earns them a profit of up to 4% for just sitting next to their swimming pool,” said Saftu.

Saftu also condemned the cutting of R160-billion over the medium term, saying government had the “gall” to suggest that it will even pull out of the existing “pathetic” agreements with the Congress of South African Trade Unions.