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South Africa’s worst budget since advent of democracy

There was no one more appropriate to deliver the worst budget speech and possibly the most anti-poor budget since the advent of democracy than Malusi Gigaba. He has served his purpose and can now be fired.

The headache after Cyril Ramaphosa’s celebratory State of the Nation address struck in the form of Zuma-appointee Malusi Gigaba’s budget speech. It felt as if the clock had suddenly been wound back and Parliament was again in the grips of Zuma times, with a discredited minister treating a national crisis as if it was an in-joke.

Julius Malema’s EFF boycotted the speech because Gigaba is so deeply implicated in state capture and corruption with the Gupta family, stretching back to his appointment by Zuma as minister for state enterprises in 2009, then Home Affairs in 2014 (when the Guptas were fast-tracked and naturalised as South Africans), and finally as Zuma ate his way through the state to be the man to replace a non-pliant Pravin Gordhan as Minister of Finance.

Gigaba, known for his bling suits and ostentatious lifestyle, delivered a budget filled with pretentious quoting and inappropriate, vacuous rhetoric. Nothing coming out of his mouth was credible when he spoke about corruption and turning around the state enterprises which he helped wreck as minister.

(President Zuma accompanied by Atul Gupta, Minister of Public Enterprise Malusi Gigaba and CEO of The New Age Nazeem Howa.) Photo: GCIS/Flickr/CC BY-ND 2.0

He laughed at his own jokes, which peppered the speech in a self-satisfied way, as he told the poor they will have to pay for their own poverty relief. Social grants are to be increased by 6.6% by October, but VAT has been increased by 7% (from 14% to 15%).

There is a reason VAT has not been increased in 25 years; it hurts the poor. One percent more VAT means almost every service and good purchased in South Africa has just increased by 0.9%.

Read: What is to be done about the Zuptas?

Added to the pain is a fuel levy increase of 52 cents per litre (an 11% tax increase) which will have an inflationary effect likely to wipe out the social grant increase. Headline inflation (CPI) and food price inflation is already heading for 5%. The poor of course are expected to be grateful for a social grant increased and to stick to zero-rated brown bread, dried mealies and tinned pilchards.

Gigaba then proceeded to slash R85 billion, of which R28 billion is for the provision of water‚ roads, electrification and public transport among other things at provincial and municipal level. Rural communities are likely to be especially hard hit by this.

A protest placard of Atul Gupta carried by two EFF members on either side of it at the Zuma Must Fall protests in Cape Town. Photo: Wiki Commons

There isn’t money for such municipal infrastructure anymore because the economy has been laid waste by Zuma and enablers like Gigaba. The budget was focused on extracting tax from the citizenry and the private sector to fix an enormous hole government has blown in its finances, far too much of which didn’t even go to the majority in the country. There was very little in the speech of actual content directed at correcting the enormous problems the economy is facing. Gigaba as our man in Treasury to fight corruption is laughable.

Total government debt has gone from R805 billion (31% of GDP) when Zuma came into office to over R2 trillion (50% of GDP), projected to be R2.5 trillion this year. There are 9.2 million people unemployed. One need not go on.

It was probably unrealistic to have expected Ramaphosa to fire Gigaba in the few days between his State of the Nation speech and the budget. Rather, let Gigaba deliver the bad news for the mess he and his cronies created.

Former President Thabo Mbeki and Deputy President Cyril Ramaphosa at the funeral service of ANC Stalwart/Rivonia Treason Trialist Ahmed Mohamed Kathrada, 29 Mar 2017. (Photos GCIS). Photo: GovernmentZA

Rapamphosa’s presidency hinges on the economy. He has to fire Gigaba at the earliest opportunity if he is to succeed. Ramaphosa has to unblock service delivery. Slashing municipal and local infrastructure budgets is a bad start. He has to stop the looting and fire incompetent officials. Punishing corrupt and non-performing officials and ministers is essential to building a culture of accountability. If he gets that right, the poor might start to believe him and the ANC again. Otherwise, the demagogues are waiting in the wings.

Jacob Zuma was swept to power at the Polokwane conference of the ANC, praised and championed by Julius Malema to be the man to wrest the wealth of the country from the control of a few. It was to be the end of the “1996 class project” of neoliberal economic policies and austerity under Thabo Mbeki, and a new age of pro-poor and progressive labour policies. But Zuma did the very opposite, subverting the unions and letting corruption run amok.

Read: Millions looted during Nelson Mandela’s funeral

Cyril Ramaphosa is now in charge. He was chair of the National Planning Commission that put together government’s economic plan which Zuma never implemented. He was also a key drafter of the black economic empowerment legislation and saw its failings.

Ramaphosa has seen first-hand how state capture works, not just from his ringside seat as deputy president under Zuma but also when the Shanduka company he founded was diddled by collusion between the Gupta’s Optimum Coal, Eskom and government regulators.

Until he proves otherwise, he would appear then to have a better understanding of the current South African economy and the world economy than any of his predecessors.

To some degree he has almost inherited a country in the economic mess it was when the ANC first took control of its empty coffers in 1994. The gains made through decades of austerity and suffering under Mandela and Mbeki have now been squandered.

We learned from the Mbeki years that although strong fundamentals and GDP growth are essential, trickledown economics is akin to trying to fill a bucket with an eyedropper. A policy of efficient redistribution of wealth is the only solution for a country with the levels of expectation present in South Africa and the constitutional rights promised its citizens.

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