If the choice, in the short term, is between borrowing or cutting social and infrastructure expenditure then we must choose borrowing. 

At the same time, we must revise the budgeting template we roll over each year, eliminate unnecessary and wasteful expenditure, and urgently get money into the hands of those who most need it.

South Africa’s current debt ratio is not excessive. If the country incurs additional debt, for the right kind of spending, then it can borrow its way out of economic stagnation.  

The suggestion that the solution to South Africa’s fiscal challenges lies in the introduction of so-called “austerity measures”, when the Minister of Finance presents the country’s medium-term budget statement on Wednesday, is misguided

Cutting spending, to critical services like education, health and social security, will relegate us to languishing in economic hardship and set us back for generations to come. It will entrench and deepen poverty and trap our economy in a cycle of low growth and induced underperformance.  

South Africa is not performing close to its potential.

This is not because it has reached its potential. It is due to a variety of forces and factors including unprecedented electricity supply constraints, collapsing logistical infrastructure negatively impacting exports, and an increasing incidence of natural disasters as a consequence of climate change.

To respond to these headwinds by reducing spending on critical social support, from health to education to social security, is to punish those most in need of the State’s support. 

This would not only be unjust; it would increase inequality which is already at a level that threatens social stability.

What South Africa needs is to shake up its entire approach to spending. Instead of asking by how many percentage points we can afford to increase funding any particular programme or perk, the question should be whether we need it at all – whether it accords with the nation’s priorities.

Hard decisions must be made about the structure of government, the role of provinces and the number and funding of municipalities. 

De-funding non-essential and inefficient cost centres requires leadership and courage, whereas cutting support to those who need it most would be catastrophic.

What we need to hear from the Minister of Finance are details of a visionary path out of stagnation through increased spending on critical infrastructure such as energy transmission, transportation and water supply – while shoring up the social welfare system.

A vision, with concrete short and medium term interventions to give the economy a chance of performing to its full potential. 

Cutting spending, bluntly, is neither innovative or bold enough to solve the multitude of socio-economic problems.  

The Minister also cannot ignore the inflationary pressures that South Africans have endured this year, and the impacts this has had on rising costs of food, cost of living and interest rates. 

Rapid hikes in the cost of living constrain consumer spending and economic growth. The Minister must tell us what the State will do to ensure some cost of living relief for South Africans. Once again it is the poorest South Africans who experience the inflationary pressures the most.

In addition, those who live without any income and who qualify for the Covid-19 Social Relief of Distress Grant have been living on R350 per month since 2020 while the food poverty line has now reached R760 per person per month.

This means that the eight million beneficiaries of the grant are not able to meet their most basic food requirements each month. This is a violation of their human rights and is socially and economically unsustainable. Section 27 of the Constitution guarantees every South African adequate social security to meet their most basic needs.

The Minister of Finance must cross the Rubicon: The SRD Grant can no longer be regarded as a temporary measure. Our economy must prioritise the provision of a Basic Income Grant, which we have calculated should be pegged at a minimum of  R999 per month.  

In the absence of an economy that is creating enough jobs to radically reduce unemployment we have no choice but to provide social security to those who have no access to any income.

The fundamental choice we face is not between cutting essential expenditure or increasing borrowing – it is in our ability to prioritise and deprioritise how we spend what money we have. 

South Africa is an emerging economy struggling to overcome a number of crises, some not of its own making. The Minister must address the economic pressures we can control so that our economy can be released from undermining itself.

 

Issued by Brett Herron, GOOD: Secretary-General & Member of Parliament