Budget 2020: Analysis

by Weizmann Hamilton

The budget announced by Tito Mboweni, signifies the most serious attack on the working class since the ANC came to power. The capitalist class, backed by the opposition parties, including the EFF ‘radical economic transformation’ posturers, welcomed the budget. The majority of them had wished for more brutal cuts but praised Mboweni for “doing his best under difficult circumstances”. Reflecting the callous indifference of the capitalists towards the masses, one analyst, echoing Mboweni’s insistence that this was not an austerity budget, described it as one of “progressive prosperity”.  

Months and even years of mounting hysteria in the capitalist media, about an allegedly bloated public service, and lazy, overpaid public sector workers has paid-off. The ANC government, as it showed with the Marikana massacre, in which now-president Ramaphosa played a critical role, has heeded the call of its capitalist masters by launching an unprecedented offensive against the working class.

The public sector wage bill, to be cut by R160 billion over the next four years by “increases” based on the Consumer Price Index minus 3% is the main target. With CPI at 4.1% this effectively means a wage increases of 1.1% and could be worse if CPI changes. Increases in the fuel levy, e-tolls, and the relentless escalation of electricity tariffs, already up by over 400% over the past five years, will all have a ripple effect throughout the economy and be passed onto the consumer. This budget constitutes the most brutal assault on working class living standards since the ANC came to power.

Although there are no proposals for public –sector retrenchments, as demanded by big business, there is no question of filling the over 200,000 vacancies that the Public Service Commission said existed in 2016. In fact a study by academics, reflected in a 2018 policy proposal by the Institute for Economic Justice, indicates that the estimated number of vacancies could be as high as one million.

Public-sector Wage Agreement

This budget amounts to not just a wage-cut but a jobs freeze. But it is the manner in which the cuts to wages are to be implemented that reflects this capitalist government’s naked hostility to the working class – particularly organised workers. Announcing its intention to drop the axe immediately, the government has opened up hostilities in the class war with its most insolent act of aggression yet – a repudiation of the commitment to pay the increase due to workers in April this year, the final year of the three-year collective agreement signed with the public sector unions in 2018.

In tearing up the collective agreement, the government has in fact launched the most serious attack on collective bargaining since 1999 when then Minister for Public Services & Administration, Geraldine Fraser Moleketi, earned herself the nickname “moelikheid” by walking-out of the wage negotiations at the Public Service Coordinating Bargaining Council and unilaterally imposing a settlement.

The cuts are as savage as they are partly because of the failure to reduce the public-sector headcount by 30,000 through the abolition of the penalty for early retirement. Only 4,600 have taken up the offer, mostly police, in all likelihood because the stress of fighting horrifying levels of crime has become unbearable.

Attack on Wages, Jobs & Services

But the axe is also being taken to other areas of social spending. This budget makes provision for further cuts of R200 billion in social spending. These began in earnest after the 2008 global financial crisis – amongst them health, housing, local government and infrastructure spending. As former Cosatu strategy coordinator, Neil Coleman, explains:

The Minister made much-ado about the R700 billion infrastructure fund. However, even in this area, the Budget falls short. Despite its perilous state, public transport spending is reduced by R13.2 billion over the next three years, mainly on allocations to Prasa and the public transport network grant. Reductions in basic and higher education infrastructure allocations amount to R5.2 billion over the medium-term. Municipalities will see cuts to water and electricity infrastructure.

Between 2010 and 2017 basic education experienced an 8% decline in per-learner funding.

In the health sector, over the next three years expenditure will increase by only 0.6%, 1% below population growth and despite medical price inflation remaining above CPI inflation. [1] 

These cuts are nothing new. Wages have been cut as the government’s own 2018 Budget Review reveals. The ‘compensation ceilings’ were reduced by R10 billion in 2017 and R15 billion in 2018. These cuts are consistent with the intensified austerity policies that government has been pursuing since the 2008 financial crisis. Researcher Kirsten Pearson describes as “austerity by stealth” the practice of routinely returning unspent budgets to the National Revenue Fund.[2] In the financial year 2019/20 this came to R3.9 billion, affecting the departments of:

  1. Higher Education and Training: R897.1 million
  2. Police: R703.6 million
  3. Department of Health: R346 million
  4. Cooperative Governance and Traditional Affairs: R310.5 million
  5. Small Business Development Department: R300 million
  6. Department of Energy: R256.5 million
  7. Department of Water and Sanitation: R215 million
  8. National Treasury: R179.4 million
  9. Rural Development and Land Reform: R117.3 million
  10. Correctional Services: R100 million

Austerity

The government’s policy is to “punish” departments by reducing their budget allocations by the amount of under-spent funds, aggravating their capacity to deliver services.

This means that even the allocations in the 2020 budget could suffer the same fate. The combined effect is that the elimination of the 2.3 million housing back-log has been postponed indefinitely, along with the eradication of mud structures and pit toilets in schools. The provision of libraries, laboratories and sports facilities at the rate required is effectively off the agenda. It also means the building of clinics, hospitals and addressing the ongoing collapse of health infrastructure, as well as water and sanitation has been pushed further down the list of government priorities. Even worse, frontline services in health and education will be starved of the critical need for more workers. The burden on underpaid and over-worked nurses, teachers and police will become even heavier.

To shift the blame for the economic and social crisis onto the shoulders of public-sector workers in particular, a mountain of distortions, manipulation of statistics and outright lies has been built to conceal the responsibility of the government and its capitalist masters for the social and economic crisis.

Generosity towards the bosses…

The reality is that from the onset the working class was never the priority of this ANC government. It was from the beginning a government of the aspirant black capitalist class who, far from intending to overthrow capitalism as far-right think tanks like the Freedom Foundation continue to suggest, they wanted to be accommodated within it. The 2020 budget is merely the logical outcome of the capitalist policies the ANC government has followed since it was elected.

At Codesa, the ANC agreed to pay the apartheid debt, lower corporate taxes from 44%, to only 28% today, and to liberalise foreign exchange regulations. It followed this by allowing the relocation of the listing of the biggest companies on the Johannesburg Stock Exchange to London. Big Business is celebrating the fact that the 2020 budget has removed the last remaining exchange control regulations.

This policy was and remains an open invitation to the capitalists to smuggle billions out of the country.  But this was not enough to satisfy their greed.  They have continued to loot billions through illicit capital flows through various schemes including mis-invoicing, profit shifting and VAT fraud, amongst others.

Judge Dennis Davies, appointed by Ramaphosa to head a committee to look at tax reform, reveals that:

According to a report issued by Global Financial Integrity in November 2018, South Africa lost, in respect of exports and imports, approximately $3.4 billion in revenue as a result of mis-invoicing just in 2016.

While falling outside the strict ambit of tax evasion, the widespread problem of Base Erosion and Profit Shifting (BEPS) by companies, particularly multinational corporations, is a clear contributor to the tax gap. The diverting of profits from South Africa to lower tax jurisdictions doubtless gathered pace as SARS’ capacity to respond, for example, to transfer pricing, was degraded. One study issued in 2018 estimated a loss of some R7-billion revenue a year, as a result of a series of well-known BEPS practices.[3]

Even one of the world’s big five auditing firms, Price Water House-Coopers, that has colluded in these crimes by advising the bosses on how to ‘cook the books’, describes the corporate elite in SA as the most corrupt in the world.

The logic of the transition from white minority rule should have meant an increase in the size (in numbers employed, budgetary provisions, infrastructure spending and service delivery needs) of a public sector now required to deliver services to the additional 90% of the population, at whom only crumbs had been thrown under apartheid.

….and animosity to the working class

In sharp contrast to the generosity shown to the capitalist class, the ANC government implemented cuts in social spending demanded by the neo-liberal Growth Employment and Redistribution and Policy (Gear), formally adopted in 1996, but preparations for which had been underway well before. It led to the closure of nursing and teacher training colleges and the introduction of water charges, forcing people to get water from polluted rivers in KZN leading to the biggest cholera epidemic in SA history.

The commercialisation of state-owned enterprises led to job cuts and, through underfunding, the disastrous situation with electricity supply by Eskom today. Claims that Eskom has 30,000 more workers than necessary ignores the reality that staff costs have in fact declined. Citing a report by Primasearch, Duma Gqubule points out:

There is a perception that Eskom staff costs have ballooned, but we find that the staff cost to revenue ratio has reduced in the past 13 years and its current level of 18.5% is lower than the 2006 ratio. Relative to its turnover, Eskom can afford its level of staffing. We do not think Eskom is significantly inefficient in its level of staffing. While there may be opportunities for efficiency improvements, we do not think rising staff cost is a major contributor to Eskom’s financial problems.[4]

Telkom employed 57,000 in 1995. Down to 15,000 today, Telkom management wants to retrench a further 3,000. In a 2018 policy briefing, the Institute for Economic Justice (IEJ), headed by  Coleman, points out that the number of public-sector workers was  reduced by 203,000 between 1995 and 1999. Although these cuts were subsequently reversed, the net increase, at just over 23,000, falls far below the increase necessary, not only to accommodate the additional 90%, but to keep pace with population growth.

Is the public sector bloated?

But this has not stopped the capitalist media from repeating the lie of a “bloated public service” so often that it is treated as accepted fact. As the IEJ study shows, the public sector employs 9% of the total workforce in SA. Under apartheid, the figure was 15%. It also employs fewer workers than countries in Latin America (14%), East Asia (11%), and 30% in Sweden and Norway.

In fact the World Bank calculates that the SA public sector makes up only 3.1% of the population compared to 6.1% for middle income countries.  There is no specific size that the public sector should be. Initially the government manipulated statistics to give the false impression that it is in fact responding to demands for increased employment to improve service delivery. Public sector vacancies were reported to have dropped by 120,000 in 2012/13. Yet the number of workers employed went up by only 70,000. This propaganda trick was performed by changing staff structures and abolishing posts. In fact the austerity programme which has entailed setting expenditure ceilings, freezing of posts have reduced the number of posts being filled.     

The centerpiece of capitalist propaganda is the claim that public sector wages are too high, have increased by 40% over the past five years or so, and are crowding out funding for service delivery. It is true that by international comparisons the public sector wage bill is high. But how has this come about? Through struggle, public sector workers have managed to slow down the rate of decline of wages relative to the constant reductions in departmental budgets. This resistance took the form most famously of the 2007 and 2010 public sector general strikes. But this has not stopped the decline of wages as a share of total income in the economy as a whole from 54% in the 1990s to 46% today. Through outsourcing, casualisation, contracting, short-time and retrenchments, profits enjoy a greater share of annual income.  The greater success private sector bosses have had in keeping wage rises down is now being used to portray public sector workers as privileged.

Moreover, the government has abused past wage agreements like the Occupation Specific Dispensation conceded in 2007 to attract and retain skilled workers.  Ministers and director-generals have subverted the definition of scarce skills to justify the employment of flunkeys, friends and family in senior positions such as chiefs of staff, special advisers, consultants and the like.

The result, as the IEJ points out, is that the top echelons – levels 13-16 which fall outside collective bargaining, absorbed 15% of the salary costs in 2016 when they constitute less than 6% of the workforce. On the other hand, 57% of personnel spending comprises 48% of the workforce on levels 0-7 which covers most nursing, policing and teaching jobs. The comparative increase in employment is even starker. Whereas teachers, nurses and police constitute 55% of the workforce, they accounted for only 40% of the increases in the number of jobs from 2009-16, compared to the High Skilled Supervision sector which has grown from 6% in 2001 to 18% in 2016.

But by far the greatest lie about allegedly overpaid public-sector workers is the one told about workers employed in the various slave labour schemes under which workers are not paid wages, but stipends. Workers in the Extended Public Workers Programmes (EPWP) are not even defined as workers so as to exclude them from the benefits of the Labour Relations, Basic Conditions of Employment, Occupational Health and Safety and Employment Equity acts and, of course, collective bargaining.

The IEJ estimates that these ‘non-workers’ employed as Community Health Workers, in school nutrition schemes, Community Works Programmes, Early Childhood Development and youth care services, in various departments total an estimated 360,000 earning an income of between R840 to R2,500 a month. Repeated undertakings by the ANC, the latest in its 2015 manifesto, to absorb these workers and give them permanent jobs, have simply been abandoned.      

How should public sector workers respond?

The 2020 budget is the last stage in a war of a carefully orchestrated strategy to cripple the public sector unions and to clear the way for a full blown offensive on the entire working class.  In the execution of the plan, Ramaphosa has enjoyed the full cooperation of the Cosatu leadership.

From Cosatu’s cowardly reaction to the Marikana massacre, and its support for him in the ANC’s succession battle, Ramaphosa has drawn the conclusion that the Cosatu leadership has now become what Trostky described as “lieutenants of capital in the labour movement”.

The Cosatu leadership has followed their condonation of the Marikana massacre with endorsing the slave-wage minimum wage law, offering to use workers’ wages to bail out the capitalist parasites that have thrown Eskom into debt, the attempt to cripple the right to strike and offered its cooperation in “containing” the public sector wage bill.

During the 2010 public sector general strike, the Cosatu, leadership, then headed by now Saftu general secretary, Zwelinzima Vavi, promised the “mother of all general strikes.”  Denouncing Cosatu’s threats by declaring that there was no such thing as an indefinite general strike, Zuma called in Vavi. Without a mandate from the unions, Vavi called-off the general strike.

The Cosatu leadership has denounced the 2020 budget as a declaration of war. Vavi, now supposedly in opposition to Cosatu, has echoed this war talk with threats to unleash mass action throughout 2020 including the occupation of the cities.

The reality, however, is that neither the Cosatu leadership, nor unfortunately Vavi, has any serious intentions of carrying through the threats. Ramaphosa took this step with the unofficial endorsement of the Cosatu leadership.

Vavi, for his part, has taken a position on the budget that, in the final analysis, is indistinguishable from that of the Cosatu leadership. The call for Tito’s removal is an echo of the approach of the corrupt, ‘radical economic transformation’ faction of the ANC, into which the EFF has now been drawn.

Since the launch of Saftu, Vavi and the entire leadership of the new federation has betrayed the promise its birth represented. A budget that represented the escalation of a guerrilla war against the working class to a full-scale equivalent of a conventional war, has been greeted without a word of denunciation of capitalism let alone a call for its overthrow and the socialist transformation of society. The Saftu leadership is in full ideological and political retreat. Absolutely no action has been taken to implement the resolution adopted at the 2018 Working Class Summit for the establishment of a mass workers party on a socialist programme.

Instead Vavi has taken refuge in the reformist arguments of left academics and bourgeois economic analysts in calling for a fiscal stimulus. Ignoring the global reality that these policies – lower, even negative interest rates, and quantitative easing worth trillions of US dollars – have failed completely to restore economic growth to the pre-2008 levels, but have created a new unprecedented debt problem affecting governments, the corporate sector and households.

This budget is a confession of political bankruptcy by the ANC, and an acknowledgement that there is no solution within the framework of capitalism except intensified attacks on the working class.  Even from a capitalist standpoint the “cure” of austerity is worse than the disease. These cuts will not only further strangle consumer demand which makes up 60% of GDP; it will also obliterate the incentive of the capitalist to invest that Vavi is hoping for.       

The birth of Saftu represented the hopes of Cosatu workers for the rebirth of the federation launched in 1985 with a commitment to socialism. If they have not followed the exodus of mineworkers from the NUM it is because Saftu has turned-out, under the present leadership, to being no more than an opposition outside of the ANC, instead of inside it.

The future of the organised working class is now in the hands of the rank-and-file of both Cosatu and Saftu. The Ramaphosa administration has declared war on the working class. What is now called for a is a public-sector general strike as the first step in rolling mass action to culminate in a nationwide general strike of public and private sector workers.

These actions must simultaneously be part of preparation of the reconvening of the second Working Class Summit to implement the resolution to form a mass workers programme adopted at its first. The ANC government has forfeited the right to rule. It is time for a workers government, the overthrow of capitalism and to commence with the socialist transformation of society.


[1] The 2020 Austerity Budget: Poor and Working-Class Communities Will be its Worst Victims, Busi Sebeko & Neil Coleman, Daily Maverick (28 February 2020)

[2] Budget Underspending: A Case of Austerity by Stealth, Kirsten Pearson, Daily Maverick (23 February 2020)

[3] The Tax Gap – Who is to blame and how do we fix it?, Dennis Davis, Daily Maverick (24 December 2019)

[4] Report Explodes Myths About Eskom’s Failure – and the Solutions, Duma Gqubule, BusinessLive (14 October 2019)

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