This Provincial Budget takes place against the backdrop of the fiscal crisis that is currently facing South Africa.
There is currently a budget deficit of R193-billion in the National Budget and ballooning national debt, which will rise to R3,4-trillion or 59,7% of GDP by 2021. The impact on the Eastern Cape is extremely detrimental.
Over the period of 2012/13 – 2018/19 financial years, taking into account the 2011 census and the budget cuts implemented at National Treasury, the weighted average for the Eastern Cape’s equitable share went down from 14,9% to 13,7 % or, R13,9-billion over that period.
Over the 2018 MTF period, we are going to lose R3,76-billion of which R 2,134-billion is on conditional grants. This is all a result of the ongoing mismanagement of our economy by the government with economic growth projected to be in the region of 1,6% this financial year, which is well below the 3% required to increase employment, decrease poverty and stabilize the national debt.
This is all resulted in R50-billion less than expected being collected in the last financial year, which will increase to R69,3-billion in the 2018/19 financial year and R89,4-billion in the 2019/20 financial year.
As a result of this, there has been a 1% Vat increase which results in the poor having to pay for maladministration and corruption. Why is it that the poor have to be taxed to bail out state entities such as SAA? Instead of increasing VAT by 1%, there are a number of steps that the government could take, which is:
- Reducing the size of the executive to 15 ministries;
- Reducing the number of foreign missions;
- Withdrawing from the new development bank;
- Wage freeze for senior civil servants and public office bearers; and
- Cutting down on public entities.
Unless we get our economy right and make some far-reaching changes, the fiscal situation in South Africa looks very bleak.
Some of the steps could be:
- Exempting small businesses, employing fewer than 250 employees from complying with restricted labour legislation other than the Basic Conditions of Employment Act;
- Removing the extension of collective bargaining agreements to non-parties who cannot carry the cost of wage agreements imposed on them; and
- Privatise or part-privatise state enterprises, such as the South African Airways and Eskom. Angola is planning to privatise 74 state companies over the next few years.
The government has been bailing out SAA to the tune of R55-billion over the years and there is a proposal for another R21-billion for over the next three years. With R76-billion, one could have at least built in the region of 300 000 houses.
We should be building houses for poor people, not bailing out SAA so that rich people can fly.
All of this would assist in giving our economy the necessary kick to move forwards and to create jobs.
When one looks at conditional grants in particular, the Education Infrastructure Grant has decreased by R101-million or 6,4%. Likewise, the Human Settlement Grant has decreased by R330-million or 14,78%.
These decreases are a direct result of the mismanagement of our economy which resulted in declining revenues. We should be building more houses, not less, if we are going to alleviate poverty in the Eastern Cape as well as empowering people with home ownership.
Owning a home and getting a title deed means that you can unlock capital to realise your dreams. You can start a business; you can borrow money from a bank without being punished with high interest rates charged by short-term lenders.
We need to deregulate RDP housing and inspire entrepreneurship through the capital that would be released into the market. It would allow people to move where jobs are available. Surely this is what real freedom is about.
When it comes to our own economy, we have the highest unemployment rate in the country sitting at 35,6%. With regard to the expanded rate of unemployment, it is now at 46%. This means that there are 771 000 people in the Eastern Cape, without jobs.
This jobs bloodbath which the Eastern Cape is experiencing has a catastrophic impact on the alleviation of inequality and poverty in our province.
It is, therefore, more important that every cent that is allocated in the budget results in us getting real value for money. And that the money that is allocated actually results in bringing about the change that this province needs.
There is a desperate need to expand broadband rollout in this province which is going to cost in excess of R6-billion, but it must be done in a way that meets procurement compliance standards. For every 10% of more of the population that has increased access to broadband, the economy grows by 1,3%.
We have other challenges that we face, such as medico-legal expenses, health accruals in the region of R500-million, and infrastructure backlogs of R151-billion. The biggest challenge that we face is the management of the wage bill.
In the 2018/19 financial year, the wage bill is R51,378-billion. This is 65,5% of the total budget which is a regression from the 64,8% of the 2017/18 budget. If we subtract the R11,263-billion in conditional grants from R78,43-billion, we are left with R67,170-billion.
Subtracting this from the wage bill of R51,378-billion leaves roughly R15,792-billion for service delivery outside of conditional grants. For every 1% that one settles the wage bill above 6,4%, we are going to lose roughly R500-million for service delivery. This is on top of an Eastern Cape budget deficit of R256 million and R164 million of unbudgeted expenditure due to the 1% increase in VAT.
If the wage bill is settled 2% above budget, then one is looking at additional budget costs of R1,5-billion if we add the deficit as well as the cost of the 1% increase in VAT. This has massive implications for the small component of our budget that is left for service delivery.
It is therefore critical, that we get this issue of the wage bill fully under control and meaningful steps are made to reduce the cost of this. We cannot continue where the ratio of support staff to core staff is completely out of line.
South Africa has a whole spends much more, percentage-wise, of its GDP on civil servants salaries than other emerging economies. The provincial government needs to put a plan on the table to right size the civil service. If you keep putting this off, more and more people are going to take to the streets.
A key issue that concerns the Democratic Alliance is the ongoing slow payments to suppliers by the Eastern Cape Government. Despite all intervention the province is struggling to make payments on time, although there have been some improvements; it is simply not good enough.
In a reply to a legislature question that I asked in April this year, there are 5 503 businesses in the Eastern Cape that are still owed R311-million in excess of 30 days. The Health Department is the greatest culprit in this regard, as it struggles to pay its suppliers with the fact that out of a total of 5 503 suppliers still owed an excess of 30 days, 3476 of those suppliers fall under the Department of Health. Under these circumstances, I don’t believe that the Health Budget is credible.
There are many countries in Africa whose economic outlook is much brighter than that of South Africa. Our economy is estimated to grow at 1,6% and 2,1% in 2019.
Some of these countries project a growth rate for 2018 is:
- Ghana – 8, 3%
- Ethiopia – 8, 2%
- India – 7, 3%
- Cote d’Ivoire – 7, 2%
- Senegal – 6, 9%
- Tanzania – 6, 8%
If it can be done in other countries in Africa, it can be done in South Africa. This requires for the ANC to break out of the ideological straight jacket in which it finds itself and make real radical economic changes that will result in the rapid growth that this country needs to alleviate poverty, inequality and create jobs that can put everyone in this province on the high road to prosperity.