FEDUSA Concerned by Widening Budget Deficit

The Federation of Unions of South Africa (FEDUSA) is gravely concerned that South Africa’s consolidated budget deficit will widen to 4.3% of the Gross Domestic Product (GDP) in 2017/18 compared to a 2017 Budget target of 3.1% of GDP as announced by Finance Minister Malusi Gigaba during his inaugural Medium Term Budget Policy Statement (MTBPS) in Parliament this afternoon. The country is faced with biggest tax collection shortfall since 2009 – R50.8-billion – and a slew of negative numbers from unemployment at its highest in 14 years, increasing levels of poverty affecting millions of South Africans and economic growth that had to be cut down to 0.7% for 2017.

Gigaba said gross national debt was projected to reach 61% of GDP by 2022, with debt-service costs approaching 15% of main budget revenue by 2020/21. FEDUSA Acting President Chris Klopper, said that the current state of affairs remains totally disheartening with a real regressive state completely evident with the skyrocketing projections. South Africa recorded a government debt equivalent to 51.70% of GDP in 2016 and now reaching 54,2% in 2017. Government Debt to GDP in South Africa averaged 38.65 percent from 2000 until 2016, reaching an all – time high of 51.70 percent in 2016 and a record low of 27.80 percent in 2008. This certainly does not bode well for the ordinary man on the street, who will be faced with crippling increases on current mortgage and other debt servicing costs that will simultaneously rise, and perpetuate the levels of unemployment, poverty and inequality.     

“Government aims to resolve the setback in fiscal consolidation by paring down the contingency reserve over the MTEF; cutting into the deficit with fiscal efforts to be announced in the 2018 Budget; kick-starting higher economic growth by implementing confidence-boosting measures and implementing reforms; and maintaining the expenditure ceiling,” Gigaba said.  FEDUSA will closely monitor the situation to ensure that the levels of confidence in the economy is restored and the impact of the revenue shortfalls, alongside wasteful expenditure, is not transferred to already over – burdened tax payers and members, emphasized Klopper. Moreover, FEDUSA cautions the Minister and insists that prudency must be applied effectively in all aspects within Government Departments to curb fruitless expenses and prevent wastage. Failure to curb expenses, will undoubtedly result in substantial increases in taxes during 2018. We cannot just expect the taxpayer to foot the bill, the State has to provide a considered plan of action to curb expenses as well, insisted Klopper.

Whilst the MTBPS has been clouded with negativity surrounding debt – servicing and fiscal consolidation, FEDUSA appeals to Minister Gigaba not to use the prevailing situation as a soft target that will have a negative impact on the public servants wage negotiations process. Service delivery remains vital in a developmental state.          

Gigaba said although conditions in the global economy continue to improve, the risks of financial turbulence remained high and that the long-term outlook for growth and commodity prices remained muted.

“The 2017 Budget projected GDP growth of 1.3% in 2017. Our growth forecast for this year has been revised downward to 0.7%, we forecast growth of 1.1% in 2018, and 1.5% in 2019.Due to lower than expected economic growth this year, gross tax revenue for 2017/18 is projected to be R50.8 billion rand lower than projected in the Budget,” he said.

“The expenditure ceiling is threatened in the current year, as a result of government’s recapitalization of South African Airways and the South African Post Office. Government is disposing of a portion of its Telkom shares to avoid a breach, with an option to buy them back at a later stage. Infrastructure investment will amount to R948 billion over the next three years”.

FEDUSA believes that the move towards stabilization and revitalization of State-Owned Companies (SOC’s) must receive immediate prioritization. The trend of SOC’s seeking bailouts to finance operational expenditure, inefficiency and waste must also be brought to an end”. This affirmation by Government will clearly be tested in the midst of turbulent encounters with SAA and Eskom. FEDUSA will continue to apply extensive pressure on the Minister in this instance as well as on the Boards of SOC’s, to ensure that progressive and accountable measures are implemented, including the appointment of worker leaders on the Boards of SOC’s, in advancing inclusive development and operational efficiencies, concluded Klopper.