Mid-Term Budget robs the poor to save SAA vanity project

The bad news of the medium-term has much to do with the effects of Covid-19, state capture and massive mismanagement by the State.

The wrong priorities are still in place: Higher Education, the National Prosecuting Authority, policing, housing and others are not receiving the necessary attention, while enormous bailouts are made to keep the defunct SAA flying, as it receives R10.5bn for its business rescue plan in addition to the R16.4bn over three years for its government-guaranteed debt.

OUTA cannot support the SAA bailout.

“OUTA is extremely concerned about the allocation of R10.5bn to implement what we believe is an unworkable business rescue plan at SAA and believes it is extremely irresponsible. We understand that debts need to be settled, but we cannot watch more precious tax revenue being wasted to revive a dying entity. South Africans do have a voice, and as we united against e-tolls, we now call on South Africans to boycott the State controlled airline,” says Wayne Duvenage, OUTA CEO.

OUTA believes that SAA should be liquidated in a manner which has the least impact on the country. The staff should get reasonable retrenchment packages, but this airline should no longer be supported. South Africa has much bigger priorities than a state-owned airline.

The Land Bank, another failed SOE, also gets a bailout. The failing Nuclear Energy Corporation (NECSA), which is not financially accountable, takes money away from the electrification programme for the poor. The time is long overdue to cut such wasteful, loss-making SOEs. We had hoped to hear some announcement of the state exiting non-core SOEs such as SAA, Denel and others, to save the tax-payer from certain future bailouts.

While the budget acknowledges the problem of corruption, it is largely relegated to the sidelines and lays the blame on Covid-19. The impact of Covid-19 on the economy and society is indeed severe. But it comes on the back of the devastating impact of state capture, which was conveniently omitted. The failure of these SOEs is a direct result of state capture and appalling governance, and bailing them out is an insult to the public, particularly when it is announced in a speech that admits that R3.5bn in Covid-19 tenders went to businesses that are now being investigated as they aren’t registered for VAT. The move away from emergency procurement to normal procurement is a good move, to better protect against such problems, but we also saw corruption prior to lockdown in normal processes.

The Minister thanked the chairs of the Finance and Appropriations Committees, but what have they done to improve the situation South Africans face? Both Sfiso Buthelezi and Joe Maswanganyi were linked to state capture. Another chairperson in Parliament, Bongani Bongo, has been apprehended for corruption (among other transgressions) - we need to see him and others like him dismissed and permanently barred from public office.

The Zondo Commission receives an additional R63million which we support, however significant additional resources and capacity is needed in a variety of law enforcement agencies including SARS and the NPA: far better to have spent that R10.5bn on this sector than on SAA.

The public service escapes wage cuts but has wages frozen, which was unavoidable to get overall spending under control. The growth in the wage bill is expected to be significantly lower, but money is being allocated for more state employment. Government’s flawed role as South Africa’s primary employment agency can’t be sustained, especially with a decrease in tax revenue. But promises here are difficult to implement: OUTA will wait to see how the court battle over the wage bill is settled. 

It’s the SAA bailout which makes for bitter reading: the R10.5bn is funded by cuts from 41 departments, with Police losing R1.2bn, Higher Education R1.1bn, Health R694m, Transport R681m, Human Settlements R345m, Basic Education R276m, Justice and Constitutional Development R195m (this includes cuts to the NPA), and so on down this sad list.

Overall, this speech falls far short of the fundamental economic reforms that were expected in the aftermath of state capture and Covid-19.

Comment in English from Wayne Duvenage is here.

Comment in Afrikaans from Julius Kleynhans is here.

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