SA’s latest budget is not one of austerity, says Treasury

The Treasury strongly opposes the assertion that its fiscal stance is one of austerity, as claimed by several critics of the 2020/2021 budget tabled in parliament by finance minister Tito Mboweni recently. 

Treasury director-general Dondo Mogajane tackled the issue in parliament on Friday when he gave Treasury’s response to issues raised during last week’s public hearings on the budget organised by parliament’s two finance committees.

The Budget Justice Coalition, which represents a number of non-governmental organisations, argued that the 2020 “austerity” budget proposals risked further harm to the economy by slashing funding for socioeconomic development. This undermined a pro-poor agenda, it said.

Government expenditure will be cut by R261bn over the next three years, including the R160bn cut in the public sector wage bill, and the real main budget non-interest expenditure contracts by an annual average of 0.8% over the medium term.

“It is stimulus, not austerity, that is needed to get the wheels of the South African economy turning,” the coalition said.

Seraaj Mohamed, deputy director of economics at the parliamentary budget office, which advises parliamentary committees on financial matters, also argued that the budget should have done more to stimulate consumption and boost GDP even if this was at the medium- to long-term expense of a rise in the debt-to-GDP ratio.

But Mogajane said the stimulus-austerity debate implied that SA was facing a short-term cyclical slowdown in growth.

“The government’s view is that our growth problems are largely structural. SA has been running large deficits for the past 10 years while GDP growth continues to decline. We need to do things differently to get growth.

“We are not in any way in an austerity environment,” Mogajane said, noting that SA was not in the same situation as Greece, an example of austerity.

“We have not said we are cutting social grants by half, cutting employees salaries by half; we are nowhere saying we are going to cease paying pensions, we are nowhere near [a situation] where austerity measures would really bring down the economy.”

With regard to the proposed R160bn cut in the wage bill over three years, Mogajane stressed that what was proposed was a slowdown in the rate of growth in the wage bill to 1.5%, 4.5% in  and 4.4% over the next three years.

“The argument that suggests that this budget is an austerity budget is not correct in terms of our view,” he said.

Mogajane conceded that efforts were needed to combat wasteful expenditure in the government and to make spending more efficient, but he said these changes were not sufficient to close the deficit that is projected at 6.8% for 2020/2021, 6.2% for 2021/2022 and 5.7% for 2022/2023.

“This year the National Treasury and the department of planning, monitoring & evaluation will undertake a new round of expenditure reviews to identify cost savings and improve efficiency. It is important to squeeze efficiencies out of the system and cut fruitless and wasteful expenditure,” Mogajane said.

The government would also examine ways to reduce state litigation, accommodation and information technology costs.

Cosatu Western Cape regional secretary Tony Ehrenreich told MPs during his earlier presentation that he found it  “inexplicable” that the budget failed to deal with corruption and wasteful expenditure. One of the grounds for Cosatu’s opposition to the proposed wage cuts is that workers should not have to bear the brunt for state capture and corruption in the government.

ensorl@businesslive.co.za