FEDUSA Budget 2021 Expectations

23 February 2021

The Federation of Unions of South Africa (FEDUSA) is keenly aware that the fight against the COVID-19 pandemic has eaten into large chunks of government revenue but does not expect Finance Minister Tito Mboweni to raise personal income tax or VAT from the current level of 15% when he tables the National Budget in Parliament on Wednesday.

Vital state expenditure since the onset of the pandemic has included extended UIF TERS and the COVID-19 R350 Relief Scheme which, while highly welcomed by organised labour would be more sustainable if they were converted into a permanent Basic Income Grant.

Finding the resources to buy vaccines for least 40 million people – the figure that has been touted by virologists as necessary to achieve herd immunity – was rightfully prioritised by President Cyril Ramaphosa in his State of the Nation Address earlier this month as this would be an important step in returning to full economic activity and recovery.

However, raising income tax or increasing VAT even if it is by single percentage point will overstretch a labour force that has already been hit hard by massive retrenchments, wage cuts, deeply reduced hours of work and furlough or unpaid leave.

The latest unemployment figures to be announced by Statistics South Africa on Tuesday for the fourth quarter of 2020 are not expected to vary too much from those of the third quarter released in September 2020, which showed that the expanded joblessness rate had grown to a staggering 43.1% as economic recovery from the pandemic has hardly started.

The government’s attack on collective bargaining by refusing to honour Resolution 1 of 2018 remains unacceptable and FEDUSA expects the Minister to announce a budgetary allocation for that agreement, failing which FEDUSA Public Sector affiliates will continue with their Constitutional Court action to force the state to honour their side of the bargain. Organized Labour within the public service is finalising its salary demands for the current financial year and expects the Minister to allocate budgetary resources for that, including resources for the professionalization of the public service and the roll-out of the NHI.

A good starting point would be for government to engage with private health care providers such as medical aids to finance and speed up the roll out of vaccines to expedite herd immunity.

While FEDUSA expects the Minister to make some important announcements on Regulation 28 of the Pension Fund Act which has been identified as central to raising resources for infrastructure roll-out – a key plan of the Economic Recovery and Reconstruction Plan – FEDUSA federation is totally opposed to any form of prescribed assets.

FEDUSA believes that any adjustments to Regulation 28 under the Pension Funds Act should be made with the clear objective of securing that retirement funds and their trustees pursue the objective of best possible risk-adjusted return for the participants.

In addition to a progressive review of Regulation 28, FEDUSA expects the Minister to make some decent resource allocations to Operation Vulindhlela, the collaborative initiative between the Presidency and National Treasury aimed at removing blockages to Jobs Creation Projects such as complex and prolonged application processes for water use licences in the mining and agricultural sectors.

Additional resource allocations beyond the Presidential Jobs Stimulus of R100 billion should also be made by the Minister if more job opportunities are to be created.

The protracted debate on the introduction of a wealth tax continues as wealth inequality in South Africa continues to expand. With a Gini coefficient above 0.9, South Africa’s inequality rate continues to surpass global wealth inequality rates. FEDUSA agrees with the sentiment expressed by the Davis Tax Committee that a wealth tax is not the only available instrument to address the inequities of income and wealth. Other methods of redress include land reform and programmes on the expenditure side of the fiscal budget such as increased access to quality health and education and the provision of infrastructure as well as effective government leading to growth and employment.

Wealth taxes are merely one tool, amongst many, with which to address the pressing problem of inequality. A properly designed wealth tax system still requires much deliberation to ensure that much needed social cohesion is established. Collective wisdom must be applied to the process to prevent further evasion and illicit flows, miss its main objective of raising more tax revenue to ensure redistribution to lower income individuals and promote greater wealth equality and economic growth for investment and prosperity.

Ends

(739 Words)

For interviews please contact:

Ms Riefdah Ajam

FEDUSA General Secretary

079 696 2625

Mr Ashley Benjamin

FEDUSA Deputy General Secretary

083 258 4433

Issued by:

Frank Nxumalo

FEDUSA Media and Research Officer

072 637 8096