Note to editors: Please find attached soundbite by Dr Dion George MP.
Today, we presented the DA’s Alternative Budget for 2023 which provides a fiscal policy platform that would redirect South Africa’s economic trajectory towards virtuous growth to generate more jobs, reduce public debt, raise living standards, and attract foreign and local investment.
South Africans are getting poorer in the midst of a cost of living crisis. Households are battling to put enough food on their tables. Unemployment continues to rise as business bears the brunt of increasing electricity blackouts and rapidly increasing debt is crowding out more and more basic service delivery. The impact of a likely greylisting by the Financial Action Task Force (FATF) later this week will be an immediate increase in the cost of compliance for South African financial institutions and this will knock on to already hard pressed consumers.
The DA’s 2023 Alternative Budget proposal is founded on our comprehensive economic policy that will deliver an enterprising economy that can halve unemployment by 2030. This starts by removing government-imposed barriers to growth. A government that is effective at serving the public limits regulation and focuses on essential services. The implementation of responsible fiscal management practices as proposed by the DA enables more economic- and labour market participation, a reduction in public debt, an attraction of foreign and domestic investment, and an improvement in living standards and the alleviation of the impact of rising inflationary pressures on vulnerable members of society.
The DA’s 2023 Alternative Budget presents how a DA government will:
- Establish a base to accelerate economic growth by reforming State-Owned Enterprises for private investment and relieving the economy of anti-poor policies.
- Reverse the upward debt spiral by containing debt and managing expenditure.
- Fight the high cost of living to protect vulnerable South Africans by introducing a conditional Basic Income Grant, increasing support for small, medium, and micro enterprises, and introducing tax relief measures
- Fight corruption by bolstering the capabilities of institutions that combat sophisticated crime.
Establishing a Foundation for Sustainable Economic Growth
South Africa’s fiscal environment remains characterized by an unsustainable level of debt, persistent deficit spending, slow economic growth, stubbornly high levels of unemployment, a deceleration of both foreign and domestic private capital formation, a decline in GDP per capita, escalating living costs and potential food insecurity, and political volatility. These circumstances are compounded by factors that fall under government purview such as uncertain private property rights, onerous labour market legislation, inadequate national and local governance, and a large and inefficient public sector dominated by monopolistic state-owned enterprises.
To establish resilience and stimulate economic growth the Alternative Budget proposes innovative solutions to attract foreign capital, encourage domestic savings, revitalise state-owned entities, fix our crumbling infrastructure, enhance labour market participation, and facilitate the expansion of both the small and large business sectors.
Boosting the energy sector and providing pragmatic solutions to blackouts
Uncertain energy supply coupled with an unstable political environment has drastically impacted the development of South Africa and severely limited the growth potential of our economy. There has been much talk regarding solutions for South Africa’s electricity crisis, yet after 15 years of living under scarce energy supply, not enough has been done.
Through the implementation of the DA’s energy sector reforms, the delivery of sustainable energy supply will be accelerated. Accordingly, the DA reiterates its call for the privatisation of Eskom and the opening of the energy sector to Independent Power Producers (IPPs), and in the interim, Eskom must prioritise the streamlining of its procurement processes while letting in massive private capacity to power a growing South Africa. By opening the energy sector, innovation and voluntary action will keep the lights on and the wheels of the economy moving towards the growth rate needed to address declining economic participation.
The DA does not support creating a New Electricity Ministry or declaring a state of disaster in the way the ANC wishes to implement one. We will not support any expenditure in this regard.
Managing Gross National Debt and Government Expenditure
The 2023 Budget must provide a fiscal framework that is focused on reducing the deficit whilst stimulating growth through responsible spending.
The Democratic Alliance’s economic policy framework, when implemented, will accelerate the reduction of national debt, and solidify South Africa’s fiscal position. This will be accomplished through the cultivation of robust economic growth, which surpasses the trajectory projected under the current administration.
The 2023 Budget must therefore be anchored on a framework of fiscal prudence that prioritizes the reduction of the budget deficit, while also fostering economic growth and employment generation.
Supporting Vulnerable South Africans
The economic situation in South Africa has a disproportionate impact on low-income and marginalized individuals, with the COVID-19 pandemic and prolonged lockdowns exacerbating this trend. The meagre post-pandemic economic recovery has been inadequate in alleviating the economic struggles faced by these groups. These difficulties are further compounded by external economic instability and domestic policies that impede economic participation and drive up the cost of living. These factors have collectively resulted in a severe cost of living crisis for vulnerable South Africans.
The DA’s intricate policy reform framework enables the financing for the rollout of a vast and sustainable social welfare net. It does so not by spending lavishly, but through generating economic growth that is guided by the DA’s policy.
Our Alternative Budget sets out several proposals for tax relief. Given the current cost of living emergency, fuel levies must be dropped, and an expanded zero-rated VAT food basket must be considered now, and not deferred.
Basic Income Grant (BIG)
The DA will provide conditional direct income support for the most vulnerable in our society. It will pay for this by accelerating economic growth and generating the necessary revenue. This is entirely dependent on the necessary economic growth generated with the proposed economic policy framework as proposed by the DA.
Government seeks to position the provision of a basic income grant as an either or. If it is to provide the grant, it will argue that tax increases, on VAT in particular, will be required. This is a trade-off because government has mismanaged the people’s money and is unable to self-correct its corruption riddled behaviour.
If government implements the requisite policies to spur economic growth and contain debt, as presented by the DA’s intricate policy framework, a basic income grant becomes viable.
Commit to the Bolstering of Corruption Busting Institutions
Corruption in an economy impedes the efficient allocation of resources and impede the functioning of market mechanisms. This can lead to a distorted allocation of resources and impede economic growth. The negative impact of corruption on economic performance can also have a broader societal impact, limiting opportunities for citizens and perpetuating poverty.
Given that billions have been directed towards bailing out dysfunctional SOEs, the 2023 Budget provides the perfect opportunity for the Minister to direct funds that have been misappropriated and wasted throughout other Ministerial departments towards law enforcement agencies that combat specialized and organized crime such as corruption, money laundering, and terrorist financing.
This is especially urgent following the Financial Action Task Force report that identified significant shortcomings in the South African financial system in combatting money laundering and preventing the flow of funds for the financing of terrorism. South Africa faces the real prospect of “greylisting” in February 2023 and this will present even more hardship for struggling South African households.
Conclusion
Our economy is in serious trouble, a direct result of governments failed economic policies. In particular, its failed model for black economic empowerment; its attempt to place a dysfunctional state at the centre of our economy and its disastrous cadre deployment policy.
The most vulnerable South Africans are paying the price for this failure as the cost of living spirals upwards and drives more and more households into poverty.
It is possible to change the direction of our economic trajectory if we make the right choices and the window of that opportunity is wide open. We must act, while we still can.