A collective of more than 100 South African economists, researchers and civil society representatives are opposing National Treasury’s planned budget cuts for government entities and departments.
“If implemented, these cuts will slow economic growth, undermine service delivery and curtail social protection, thus exacerbating unemployment, hunger and social instability… This strategy is self-defeating as economic contraction resulting from such cuts would make debt repayment more difficult.” “Treasury has been convinced this is the right path for a decade; Treasury is ideologically and dogmatically committed to a path of fiscal austerity… So, this is just an extremely opportune moment for National Treasury to push through the types of expenditure cuts which it’s wanted all along,” said Isaacs.showing that, on average, fiscal consolidations did not reduce debt-to-GDP ratios.
“In addition to a revenue shortfall there is also an expenditure overrun. The expenditure overrun is predominantly due to the National Treasury failing to budget adequately for foreseeable expenditure and departments should not be punished for this. The largest share of this is R37.5-billion from the predictable public sector wage bill increase,” according to the letter.
“I do think that it’s possible to mobilise a significant segment of society behind us, but that’s really a matter of which institutions or social movements, unions, political parties are prepared to take up those issues.”The broad support for the open letter indicates that there are many people thinking about how to approach South Africa’s fiscal challenges in a different way to Treasury, according to Daniel McLaren, public finance economist at Ilifa Labantwana and signatory to the letter.
“The per-child ECD subsidy only reaches about 700,000 of the 4.5 million eligible children and has been frozen at the extremely low level of R17 per child per day for four consecutive years,” he said. The private sector ensures their businesses survive with effective strategic and operational management. Employees are not rewarded for poor performance and if a company cannot afford to give staff a salary increase, so be it.