FEDUSA Budget 2019 Expectations

19 February 2019

When Finance Minister Tito Mboweni tables his maiden Budget Speech before a joint sitting of Parliament on Wednesday, the Federation of Unions of South Africa (FEDUSA) expects him to announce much more than just the quantum of national treasury’s financial assistance to Eskom, the troubled state power utility that is struggling with a heavily skewed balance sheet characterized by a debt burden of more than R420 billion, a figure that is more than double its net asset value.

Specifically, FEDUSA expects the Minister to announce how the break-up of Eskom Holdings into three operational streams, namely generation, transmission and distribution as announced by President Cyril Ramaphosa in his State of the Nation Address earlier this month will dovetail into a carefully considered plan to rescue the power utility that does not rely on retrenchments as its point of departure.

Workers alone cannot be expected to carry the burden of the current crisis at Eskom, the direct result of a combination of negative impacts that are not of labour’s own making including an outdated business structure with the state as the sole shareholder, inflated management salaries and perks; and corruption. At any rate, sovereign credit rating agency Moody’s, the only one that has retained South Africa’s investment grade rating compared to Fitch and Standard and Poor that have already downgraded the country to junk status or sub-investment grade, has cautioned against the folly of just throwing state money into the Eskom black hole.

In addition to dealing decisively with Eskom, FEDUSA expects Minister Mboweni to announce  fresh policy reforms for the rest of state owned enterprises including SAA, SABC, PRASA and TRANSNET that have either been an endless drain on the state’s financial resources, ravaged by corruption and inefficiencies or a combination of all these negative factors, that will overhaul their current archaic business models in a way that factors in the reality that South Africa cannot afford to be bailing them out endlessly.

President Ramaphosa also announced in the SONA that the National Health Insurance (NHI) Bill will be introduced in Parliament shortly, as well as the introduction of tablets for all school children. Whilst below-inflation increases in medical tax credits were announced in the 2018 Budget as a measure to help government fund the rollout of the National Health Insurance (NHI), FEDUSA anticipates a continuation of the policy, meaning that contributing medical aid members will get relatively less tax relief for their contributions. Although FEDUSA welcomes universal  health access in principle as proposed by the NHI, it would urge for extensive consultation on the matter within the NEDLAC domain. FEDUSA also expects the Minister to give clarity on the national approach to the 4th industrial revolution in response to the rollout of tablets for school children, as mitigating factors must be implemented to ensure that one of the oldest unions in South Africa in the printing, paper and packaging sector and an affiliate of the federation, the SA Typographical Union (SATU) does not find itself faced with thousands of layoffs. This would most certainly be in stark contrast with the resolutions tabled at the Presidential Jobs Summit.

FEDUSA also expects the Minister to spell out how the state will allocate decent resources to roll- out a national machinery for combating the scourge gender based violence in earnest and support early childhood learning.

FEDUSA also expects Minister Mboweni, who has indicated that he might not be available to serve another term as Minister of Finance after the May 8 general elections, to announce that national treasury might consider taking some of Road Accident Fund (RAF) debt that is expected to balloon to R393 billion by financial year 2021/22; necessitating sharp increases in both RAF and fuel levies in each of the three years to that financial year on top on increases of up 30 cents and 20 cents a litre expected this year respectively.

Finally, good governance enhances financial performance, which is critical for sharing of the wealth through investment in sustainable enterprises over the long term.

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