NUMSA commemorates the 100 year anniversary of the Russian Revolution

Numsa Statement on The Mid-Term Budget Policy Statement By Finance Minister NHLANHLA NENE

24 October 2014, Posted in Press Releases



23RD October 2014

Will more of the same result in Socio-Economic Transformation?

New Finance Minister Nhlanhla Nene’s Medium Term Budget Policy Statement (MTBPS) once more confirms the most obvious fact: the ANC government long buried the Freedom Charter and is now happy to use the language of the failed GEAR policy now called the National Development Plan (NDP) as its guiding principles and programme, for national budgets.

Things like “sale of non-core assets”, which is a polite phrase for privatisation and the punting of Public Private Partnerships and concessioning of major projects to support private accumulation  (e-tolls being an example), are back on the table.  These developments, confirm the correctness of our analysis that neo-liberalism has strengthened its grip of South Africa, and that the working class has to organize through a United Front to resist it.

The MTBPS is self-contradictory – it recognizes the plight of the majority of South Africans but continues to rely on the same neoliberal GEAR/NDP medicine that has sustained pinning the working class and rural poor down into mass poverty, unemployment and rendered them victims of extreme inequalities.

Among many good things, the Freedom Charter demands that the people shall share in the country’s wealth first, and only this can then lead to all-rounded economic development and real growth, and not the other way around.

No amount of neoliberal capitalist tinkering with national budgets will eliminate the mass poverty, nationwide structural unemployment and extreme and painful inequalities mostly affecting the Black and African working class, and rural masses. This is the continuing colonial basis of South Africa’s economy post 1994: mass unemployment, low and poor wages among the Black and African working class and mass poverty for the rural populations and extreme wealth in a tiny capitalist class joined by a parasitic Black elite. 

The past twenty years must surely have provided enough proof for this most self-evident truth.

This MTBPS is certainly not radical in any way! It does not propose, nor lay the foundation, for changes in the structure of the economy, including its ownership patterns. It is in all respects similar to previous budgets: in the past 20 years Finance Ministers have come and gone, but the neoliberal capitalist framework has remained intact.

Like Budget Frameworks before it, this MTBPS has failed to set appropriate and redistributive macroeconomic parameters within which the majority of the people of South Africa, who are the working class and rural poor, could have their lives changed for the better. 

The structure of South Africa’s economy and its ownership are colonial.  The economy exports raw minerals and is de-industrializing, very fast. It is increasinglyforeign-owned and so crucial decisions about things like the budget are not in the hands of South Africans. To change this, we have to seize ownership and control of our economy.

This MTBPS is a budget statement for a bad, colonial economy, so it is a bad MTBPS.  It is as bad as previous MTBPS, if not worse – Nene like his predecessors needs to confirm that he will toe the neoliberal capitalist line, in post 1994 South Africa!

The following configuration determines the budget stance, in our view.

SA is sitting with almost 5.6% current account deficit, which means foreign debt is rising!  Total foreign debt is rising faster than export earnings.

Domestic investment exceeds saving by almost 6%, which means that private sector debt is also rising!

The budget deficit is almost 4% which means that public debt is rising; in 2008 it was 28% and it rose to 46% in 2014, will keep rising towards 50% in the foreseeable future, while profits flow out of the country. 

Why is this the case? There has been massive de-industrialisation since the 1970’s. This de-industrialisation has increased over the last 20 years because of trade liberalization. In sectors such as electronics and capital goods SA has more than 400% deficit and the privatization of steel manufacturing (Iskor), has raised steel prices and made domestic manufacturing very uncompetitive.

In terms of net outflow of profits, there has been de-listing and dual listing of major South African companies abroad, such as Anglo.  This means their profits are now expatriated from SA. In the past twenty years we have witnessed massive foreign ownership of monopolies: the mines, the banks, SASOL, Arcelor-Mittal, and others. 

This structural situation has generated a perpetual current account deficit for South Africa.

South Africa cannot save for the massive investments it needs to resolve its socio-economic development crisis. We cannot save because of massive outflow of profits (a significant amount illegal) and low wages (half of South African workers earn less than R3 000 a month). The result of massive outflow of profits and the weak industrial base is reflected in the investment-savings imbalance.

We are in the foolish situation where the country needs high levels of investments, we allow profits to go out both legally and illegally. Of course the only option left is to raise huge debts! We have now firmly entered a precarious debt trap, which the Ministry of Finance acknowledges, but are incapable of getting us out of it. Instead, they mourn and complain about being downgraded by rating agencies!

We are fast becoming an economy heavily dependent on capital flows, to manage our deficits.  But these inflows have not been enough to cover our imbalances and deficits.

The Reconstruction and Development Programme (RDP) warned us, that these capital flows are too volatile to be relied on for steady financing. In addition they increase foreign debt! South Africa’s foreign debt increased from $25 billion in 1994 to $140 billion in 2014. Ever year South Africa  accumulated $5.75 billion in debt. As long as the current account deficit persists, this debt will keep on rising till it reaches crisis levels.  Why? Because of increasing foreign ownership and deindustrialisation!

Rather than target growth of jobs and growth of the real economy (manufacturing, agriculture, construction and so on) the Reserve Bank has pathologically persisted in using inflation targeting as their basic tool to protect the value of the rand and other money assets. To prevent depreciation of the rand, which they have of course miserably failed, they raise interest rates. Naturally, this has led to our failure to create jobs and promote growth of the real economy!

NUMSA is not surprised that Nene has announced further cuts in the budget, in order to continue to play games with our ever-rising budget deficits! The fact is South Africa will never ever, under the neoliberal capitalist regime, with the set-up we have described above, meet its targets because this would require politically impossible cuts in budget spending, and massive taxation of South Africa’s rich capitalist class. The alternative, of course, is to sink deeper into debt, and the vicious circle continues until society explodes!

What are some of the immediate scapegoats Nene has announced? Reduction, curtailment, and containment in government spending.  Government wage bill is obviously number one target!

In the world’s most unequal country, with 23 million human beings living well below R650 per month in a country of 53 million people, we wonder how the hundreds of thousands of more and better educated and trained teachers, doctors, nurses, clinicians, sanitation officers, agricultural officers, engineers and so on, whom we badly need to develop our human capabilities are going to come from!

Of course corruption is systemic, structural and perfectly natural to any neoliberal capitalist dispensation, especially in a colony such as we are. Outside the radical implementation of the Freedom Charter, and a rapid advance to a socialist economy and society, corruption and all sorts of fraudulent ways of becoming rich are a necessary and essential arsenal of the emerging post-Apartheid capitalist society in South Africa.

Under-spending by departments, municipalities and slow service delivery – for example the Urban Settlement Development Grant (USDG) which came into effect in 2011 has seen major under-expenditure or under-utilisation of allocated resources.

The lives of the majority of the South African working class are already very bad. Rather than wait until the Nene’s of this world are no longer able to even put up a fake show of pretending to be in charge of our ever growing indebted state and society, it is time to educate ourselves, mobilize, organize as a working class, and struggle for an alternative human society not based on profits, but human needs and values. Such a society, in which human beings come first, is of course a socialist society.

This country is cash flush, the issue is who owns the means of production and how is this surplus allocated among different activities? Will more of the same budgetary measures results in socio-economic transformation; the answer is, clearly, NO!

Irvin Jim,

Numsa General Secretary


Castro Ngobese, Numsa spokesperson , 083 627 5197