Cosatu: Budget must address structural economic challenges
Zingiswa Losi
Workers and the nation await the pending 2025/26 Budget due to be tabled at Parliament by the Finance Minister, Enoch Godongwana.
The working class has borne the brunt of our many painful socio-economic crises, from a dangerously high 41.9% unemployment to entrenched levels of poverty and inequality, endemic crime and corruption, a high and rising costs of living, struggling public and municipal services, and embattled State-Owned Enterprises.
South Africa has been battling to attract domestic and foreign investment, a matter made worse with our grey listing. The current geopolitical tensions will exacerbate these.
We have normalised these crises when they require decisive action to overcome them. While many factors are beyond our control, we must use the tools at our disposal.
Our most important weapon is the Budget. It has the capacity to drive investment and deliver public services enabling society and the economy to function. It can stimulate growth for an economy stumbling along at 1%, provide relief to the poor and develop a pathway to employment for millions.
Its natural for analysts in airconditioned offices to approach the Budget from a balance sheet perspective. Of course, we need to reduce the deficit and set debt on a sustainable path, but most critically we need to put out the many fires that if not dealt with threaten South Africa’s very fibre.
Cosatu’s fundamental difference with the budgetary approach Treasury has pursued over many years is it has treated the symptoms of our illnesses, not the causes. It embraces an ineffective business-as-usual approach whilst our house has been flirting with anarchy.
We need to deal with the structural constraints to growth, unlock and stimulate the economy and create jobs and decent work. We need to put money into the hands of people that desperately need it. These will generate the tax revenue the fiscus requires to fund public services and reduce our debt burden.
Tinkering at the sides by shifting funds here and cutting expenditure there resolves nothing. It has allowed our deep socio-economic crises to fester. If we fail to be decisive and tackle them, they will one day explode. The costs spent picking up the pieces will be far greater than the funds spent now capacitating the state to address these burning fires.
To get the economy growing and turn South Africa around, the Budget needs to:
– Ramp up support for Eskom to ensure loadshedding and load reduction are over and consumers and industries have reliable and affordable electricity.
– Intensify interventions at Transnet and Metro Rail to ensure they are at full capacity to unlock mining, manufacturing and agriculture; major sources of revenue and jobs; as well as providing safe and cheap transport to commuters for going to work, thus boosting the economy.
– The largest cause of our revenue shortfall is caused by the problems at Transnet and the impact these have on mining. Fix these and the long-delayed mining rights application system and mining will take off, jobs will be created, and revenue will flow in. Don’t and we will continue to bleed.
– Put in place urgent measures to stablise the increasing number of dysfunctional municipalities and shift towards a new funding and District Development model.
– Increase funding for frontline public services, particularly education, law enforcement, health, and home affairs, ensuring they have the necessary resources to fulfill their constitutional mandates.
– Accelerate the public infrastructure programme and tackle blockages to it, in particular construction mafias.
– Develop a new mass industrial financing programme mobilising public and private funds for labour intensive sectors, SMMEs, industrialisation and value-added exports.
– Expand public employment programmes to provide the skills and experience participants need to find permanent work.
– Provide relief for the unemployed through the SRD Grant and link its participants to skills and employment opportunities.
– Provide SA Revenue Service with the resources needed to curb illicit financial flows and customs fraud to increase funding for the fiscus, stamp out corruption and protect local manufacturers from illegally underpriced imports.
The economy will grow if we fix the state, stimulate growth and slash unemployment. It will not grow by squeezing already badly under resourced public services and cutting back on investing in public and economic infrastructure.
Cosatu will never agree to increased taxes for the working class, in particular any increases in VAT or personal income tax for low-income earners.
Such increases would plunge working class families are already bleeding from the rising cost of living and a 400 basis points hike to the repo rate, deeper into debt. A VAT hike will stoke inflation and take money out of the economy when its most needed to spur growth.
It would send a message to society that government cares more about balancing tables and graphs and appeasing international funders, than workers being able to put food on the table and buy electricity. This is a message politicians (particularly those in the ANC) should clearly hear as we head towards the 2026 local elections.
Increased revenue needs to be secured through investing in Sars by providing it the resources it needs to tackle tax evasion, illicit financial flows and customs fraud. An additional R3 billion invested in Sars will enable it to boost tax compliance from 64% to 67% providing an additional R60 billion badly needed revenue owed to the state. It makes no sense to bleed those who pay their taxes and ignore those who don’t – it’s a recipe for rebellion.
The government has a choice: continue on a path that squeezes the poor and starves public services, hoping for an economic recovery; or fix the state and ensure it has the necessary resources to stimulate growth, tackle unemployment and equip Sars with the tools to collect the funds the fiscus desperately needs.
We cannot afford to inflict further pain upon workers and the poor. The government needs to deliver a Marshall Plan to take the economy to the 3% plus growth needed. We cannot afford another limp budget, let alone one that pickpockets workers through VAT or personal income tax hikes.
Cosatu President Zingiswa Losi
BUSINESS REPORT