Last Wednesday, 28 October, Finance Minister Tito Mboweni, on behalf of the ANC government, announced the following:
- The wages of all public sector workers will be frozen for the next three years. This will affect teachers, nurses and other health workers, police officers, and workers in all other government services. This pay freeze comes on top of the pay rise already cancelled by the ANC government. In reality, this new freeze will mean a pay-cut. Prices will continue rising and public sector workers’ salaries will buy less and less.
- R300 billion will be cut from national government departments, provinces and local government over the next four years. The budgets for water and sanitation, schools, clinics and hospitals, for example, will all suffer. This will have a massive impact on already poor service delivery.
- Over the next four years taxes will be increased by R40 billion. The details will only be revealed in the February 2021 budget, but we can be certain that they will fall heaviest on the working class and middle class.
In other words, the ANC government has prepared a massive assault on the living standards of the poor, the working class and the middle class. Showing the cruelty of the ruling class, Mboweni cracked jokes, and meandered through whimsical asides, whilst delivering his speech, seeming not to care in the slightest about the pain that will be inflicted upon millions.
The Ruling Class’s Problem
Mboweni and the government’s rhetoric tries to hide the real agenda and the real interests being served by the new spending announcements. The idea of a “social compact” – where a so-called “united” society agrees on the necessity for these “hard decisions” – is nothing but a trap for the working class. The ruling party’s top priority is the defence of the capitalist profit system and the protection of the interests of the minority capitalist class.
The South African ruling class – the super-rich bosses and the politicians that serve them – have driven their own capitalist economy into the wall.The most immediate danger facing them now is what is known as a sovereign-debt crisis, or government-debt crisis. Such a crisis happens when a government runs out of money to service and pay back its debts – and defaults on these debts.
This crisis has been building-up for years. Even without the pandemic, the weak world capitalist economy was decisive in a decade of economic stagnation in South Africa. We will deal with this in a future podcast. This, combined with the parasitic tender-system, corruption and state capture had created a budget deficit of nearly 7% by the start of this year. In other words, for every one-hundred rand that the government had committed to spend, it only had ninety-three rand in the bank. It found the missing seven rand by borrowing it.
The lockdown worsened this deficit massively. It is now nearly 16%. So sixteen rand is borrowed for every one-hundred rand that government spends. This means borrowing R2.1 billion every single day.
As a result total government debt is sky-rocketing. R4 trillion in total is now owed – the equivalent of two years of government spending… on everything! Mboweni says this will climb to R5.5 trillion in just four years.
But this money is not borrowed for free. Interest is charged on it. How much the government has to pay is determined, largely, by the global money markets – the international capitalist mashonisas. They are charging the government 9% interest. So, to borrow its daily R2.1 billion, the government agrees to add R190 million when it pays back the money. Just paying this interest now accounts for 5% of all government spending. And this proportion is going up and up. Next year the government will spend more on interest payments than it does on healthcare!
The public sector wage freeze, the huge budget cuts and the tax increases announced by Mboweni are to ensure that the local and international capitalist mashonisas get this interest – their profits. In class terms, the medium-term budget policy statement is the ANC government’s declaration that the working class and middle class will be sacrificed to defend the profits of finance-capital.
The ANC government is however a willing debt collector. For example, in the June Supplementary Budget, Mboweni proposed spending cuts equivalent to 7% of the economy. It was pointed out to him that even the worst so-called IMF structural-adjustment programmes usually only demand cuts of 4%! He has now, reluctantly, slowed down.
Divide and Rule
Carrying out this attack, and managing the class conflict it will provoke, is a delicate task for the South African ruling class. As always, they will use the weapon of divide and rule. Mboweni’s speech tried to turn different sections of the working class against each other, and to turn the middle class against the working class. The bourgeois media is co-operating fully with this agenda.
A massive propaganda campaign is underway against public sector workers. They are being portrayed as lazy, pampered and over-paid. Working class and middle class tax payers are being encouraged to blame public sector workers for the tax burden they face, rather than widespread corruption and the predatory behaviour of the capitalist mashonisas. But by the government’s own calculations, 30-40% of the government budget is lost to corruption every year, through inflated tenders and the non-delivery of services. The recent PPE-corruption scandal, is, in reality, routine practise under ANC-rule.
Mboweni, trying to score points in the ANC’s factional struggle, announced cuts to police, schooling and healthcare to fund, so he says, South African Airways, SAA. Presenting it in this way was a political choice, calculated to further undermine public support for SAA workers. A price tag could just as easily be attached to the profits made by tenderpreneurs in each department to explain where money for jobs and services is really going. Instead, working class communities are encouraged to blame SAA workers for the lack of police, teachers and nurses.
The working class must reject every attempt by the ANC government and its ministers to turn workers against each other! To their divide and rule we must respond with class unity.
Class Struggle to Escalate
The ground has been prepared for a massive escalation in class struggle in the coming months and years.
The cuts to services will lead to a further increase in community struggles and service delivery protests. Already, there has been an increase from an average of two per day before the pandemic, to eight per day in July, when the latest figures were published. A number of media commentators, with an eye on the recent uprisings in Nigeria and Mali are warning, again, of civil unrest. This is why the Social Relief of Distress grant has again been extended to the end of January. Its withdrawal is already a political headache for the ruling class against the background of a massive increase in unemployment and poverty.
Public sector workers are furious. Until now, the Cosatu leadership in particular, has done everything possible to hold workers back from a full-blown public sector general strike. In December, the Labour Court of Appeal will rule on the lawfulness of this years cancelled pay rise. Even if the ruling goes in favour of the workers, the three year wage freeze still poses the need for strike action. The ANC’s attack on public sector workers has also called Cosatu’s support for the ANC, through the Tripartite Alliance, back into question with a new ferocity.
Socialists and Marxists must continue to campaign in the trade unions for a public sector general strike and to prise open all the political contradictions of trade union support for a capitalist government. We say: Workers, take Cosatu out of the Tripartite Alliance!
For a Socialist Programme
On the basis of capitalism the poor and working class will be made to pay for the crisis of capitalism. The working class and trade union movement must be armed with a programme that boldly puts forward the need to break with capitalism.
The burning question is: what should be done about the government debt? This cannot be approached as a technical exercise. It should not be the role of trade union leaders to write policies advising the ANC government and capitalist state on how to balance the country’s books or grow the capitalist economy. They should certainly not be offering workers’ savings in the Government Employees Pension Fund to pay-off the debt of state-owned enterprises like Eskom.
The foundation for the now massive government debt was created from the onset of ANC rule. Even before they were elected, they agreed to borrow money from the IMF to pay-off the apartheid regime’s debt. After adopting the neo-liberal Gear policy in 1996, they took this further. They reduced corporate tax from 44% to 28%, donating billions to their capitalist masters. They relaxed exchange control regulations allowing big business to take billions out of the country legally, every year. As a result South Africa is thought to lose ten to 25 billion dollars every year in so-called “illicit flows”.
The debt is a political question in the class struggle. Its solution demands an independent working class approach.It is time to raise the following slogan: The working class refuses to pay the debts of this anti-working class ANC government and its corrupt politicians!
Around 70% of the government’s debt is owed to local capitalists – the major banks, big business and various investment funds. As a first step, the banking and financial sector should be nationalised and placed under the democratic control of the working class. On this basis, the interest payments on government debt could be abolished and a true determination made about the financial position of the economy as a whole.
Nationalisation should be extended to the mines, the big commercial farms, construction, manufacturing, telecommunications, the big wholesalers, retailers and distributors. On this basis, the capitalist distinction between debtor and creditor, only possible on the basis of a capitalist economy parcelled-up by private ownership, could be ended. In its place, the socialist planning of society’s resources, wherever they originate, would ensure all basic needs are met and living standards raised.
The 30% of the government’s debt held by overseas capitalists requires additional socialist policies. These capitalists would rush to pull their money out of South Africa, provoking an economic and currency crisis. To combat this sabotage, a state monopoly on foreign trade, alongside capital and price controls, would be necessary. These must be under the democratic control of elected committees of working class representatives.
Capitalist governments around the world would immediately move to punish the South African working class. The response must be an internationalist policy appealing for working class solidarity and action to tie the hands of the ruling classes.
Build a Workers Party
Every political party takes it for granted that the debt must be paid. To those parties that posture as ‘radical’, ‘left’, or even ‘socialist’ the question must be put to them: should the debt be paid? The same question must be posed to the leaders of the trade unions. This one question can expose which side of the class barricades anyone they will stand upon in the class struggles that lie ahead.
There are important lessons from the 2015 Greek government led by the Syrizia party. In words, Syrizia opposed the working class being made to pay for Greece’s sovereign-debt crisis. But when swept into power by the working class, they refused to repudiate the debt, let alone break with capitalism. Ultimately, in deed, they sided with the European capitalist classes, and refused to lead a struggle. The Greek working class’s living standards plunged and have never recovered.
This is why the need to build a socialist mass workers party is more urgent than ever. All of the above socialist measures require a political vehicle that is capable of forming a workers government.
Cosatu must break with the ANC now! Saftu must reconvene the Working Class Summit and implement the resolutions taken by both in favour of creating a mass workers party.
The foundations for this must be laid now, and they must be laid urgently. The 2021 local government elections are fast approaching. In his speech, Mboweni made it clear that he will pass the spending-cuts axe to local politicians, letting them decide what to cut and how. Just as the ANC is a willing debt collector for the capitalist class, we can guarantee that all the parties in parliament, province and local council will swing the axe with little complaint. Let us seize the opportunity of the 2021 local elections to campaign in communities against the ANC government’s spending cuts and popularise a socialist alternative.