FEDUSA Expectations from Budget Speech 2018
20 February 2018
The Federation of Unions of South Africa (FEDUSA) believes Finance Minister Malusi Gigaba will have a tough balancing act of competing imperatives on his hands on Wednesday as he delivers the National Budget in an environment of low growth, high unemployment and sovereign credit rating downgrading to sub-investment grade by two major rating agencies: Standard & Poor; and Fitch. A third credit rating agency, Moody’s, has given South Africa an opportunity to rectify a number of key areas to avoid another downgrade to junk status. It is estimated that a downgrade by Moody’s would render South Africa poorer by a massive R800 billion according the NEDLAC Sovereign Downgrading Task Team said Dennis George FEDUSA General Secretary.
FEDUSA assumes Gigaba will increase VAT to 16% as one of the options to increase revenue collections. We strongly reject any such proposal as it will further exacerbate the deep levels of inequality within our society. Instead, we propose that the Finance Minister consider some previous proposals by his predecessor Minister Pravin Gordan, who during the previous budget speech introduced a new top marginal income tax bracket for individuals earning more than R1.5 million rand per year which raised an additional R16.5 billion. We think that Gigaba should announce a package of austerity measures to curb wasteful and fruitless expenditure across government departments that could run into billions of Rands.
During the previous budget speech Minister Pravin Gordhan introduced a new top marginal income tax bracket for individuals earning more than a million rand per year, which raised an additional R16.5 billion. We think that Gigaba needs to give a very clear indication of how the National Health Insurance or NHI will be financed. FEDUSA requests the Finance Minister to ensure that his Budget includes the resuscitation of the funding of unfilled posts due to lack of funding , most hospitals and school have a high vacancy rate as a results of lack of finances , hence most facilities are working on a skeletal staff especially the clinics
At the same time the Minister needs to announce a package of austerity measures to curb wasteful and fruitless expenditure across government departments that could run into billions of Rands.
Within this context, it is important for Gigaba to make provision for a decent salary increase on a sliding scale of between 8% and 12% for public servants. President Ramaphosa praised the hard work and productive public servants and said they serve our people with diligence, integrity and commitment, and called on our public servants to adhere to the principles of Batho Pele, of putting our people first.
President Ramaphosa also announced in the SONA that Gigaba would provide clarity on the source and quantum of funding for free higher education for first year students. The Presidential Job Summit and the I million Youth Employment Scheme could provide a stimulus for revenue generation through personal income tax as a result of the expansion of the tax base by additional 300 000 youth employment opportunities. The Investment Conference announced by President Ramaphosa could further stimulate the economy and provide addition tax revenue in the form of corporate income tax. It is also imperative for the social partners to introduce new measures to support the achievement of higher inclusive economic growth and employment creation.
Our public servants through the Public Investment Corporation (PIC) look forward to proactively participate in the Investment Conference to support the social economy for the provision of affordable housing for public servants that will also stimulate the achievement of higher economic growth and employment creation. Our public sector affiliates stand ready to invest more in the economy but the Minister of Finance must accede to the demand to have experience worker directors on the PIC, SOCs and listed company where they are invested through pension funds. The involvement of experience worker directors could provide extra eyes for prudent investments and to monitor corruption and maladministration in these companies.
Finally, good governance enhances financial performance, which is critical for sharing of the wealth through investment in sustainable enterprises over the long term, as the Federation is totally opposed to shortermism.
FEDUSA is the largest politically non-aligned trade union federation in South Africa and represents a diverse membership from a variety of sectors in industry. See www.fedusa.org.za for more information.
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