The ANC 2016 Budget, African Socialism Answers

[Philip Copeman]

The President of the PAC

The Honorable Minister of Finance,

The ANC Government, The Democratic Alliance,

The Government Workers, White Monopoly Capital,

Fellow South Africans

I thank you for this opportunity to answer the 2016 National Budget and to present an Alternate Budget motivated by African Socialism.

Minister, I present Table1 as a list of background assumptions produced by your office and I am not going to take issue with these assumptions save to note the weakness of the CPI as a means to measure inflation and to point out the a low growth economy with minimal growth in Fixed Capital Formation is choice we don't have to make. 40% of our population is far more effected by food price inflation which is currently rampant. This devastating effect of inflation increases as we examine the poorer parts of our population. I also question that CPI Inflation will be restricted to your forecast 6.8 percent in 2016. We face severe cost push pressures.

Table 1

	2012	2013	2014	2015	2016	2017	2018
Household Consumption	3.4	2.9	1.4	1.4	0.7	1.6	2.2
Gross Fixed Capital Formation	3.6	7.6	-0.4	1.1	0.3	1.4	2.7
Exports	0.1	4.6	2.6	9.5	3.0	4.6	5.2
Imports	6.0	1.8	-0.5	5.3	3.7	4.5	4.9
Read GDP Growth	2.2	2.2	1.5	1.3	0.9	1.7	2.4
CPI Inflation	5.7	5.8	6.1	4.6	6.8	6.3	5.9
Current Account Balance % of GDP	-5.0	-5.8	-5.4	-4.1	-4.0	-3.9	-3.9

Minister, you barely mention Inflation in your 2016 budget but the question of inflation is important, because if I am correct that you have deliberately understated the impact of cost push inflation induced by your past mismanagement of external investor confidence in our future, then you have effectively used fiscal creep to put the problem of wage pressure firmly into the lap of the unions and the private sector, who will shortly be left to explain to workers why their 2016 after tax pay checks buy less at the till.

In Table 2 we are willing to accept a forecast of GDP at R 4,5 Trillion with a forecast tax collection of R 1.350 Trillion. Given the high inflation forecast I feel we will have no real problems making our tax collection. We accept your estimate of Tax revenue being 30% of GDP. However this is a good moment to note that under the Apartheid Government this figure was closer to 20% and under the management of President Mbeki and Minister Manuel the tax take was around 25% in a period where we repaid the Apartheid Debt. This secular tax increase serves as an indictment of your lack of restraint and the creeping bloat of the Government sector under the ANC and Zuma administration. You have for years required austerity from the private sector and have squandered the takings. In 2016 Government wage rates exceed those of the very organisations providing your tax revenues.

We do take um-bridge with what you propose to do with Revenue...

Mafika, there are two simple concepts to understand about African Socialism. Our desire to break the bondage of colonialism and our desire for all Africans to enjoy the shade of our Tree.

Minister for you to stand there with a straight face and present us a deficit plan for the 8^th year in a row is scandalous. Our Debt servicing is now running at R147 Bn, being now almost equal to our social grants. Your budget is for us to increase this deficit! Shame on you. This strategy serves to drive us further under the yoke of colonial control and subservience to white monopoly capital. African Socialism proposes a budget surplus and one that begins to unwind the damage your Government has wrought on our children's future.

To white monolpoly Capital (those financing the deficit) we say enough is enough. You are welcome to invest money in South Africa, obey our laws, never bribe an official, do not transfer price your profits and always pay your tax obligations. African Socialism offers you a freedom from Government intervention, a mild tax regime and a good ROI. We ask only that you respect our goal of universal upliftment. We do not want your debt finance, we will not sell our children to slavery and we will not give up their future for a few beads and baubles in the form of interest bearing loans. We will not run Deficit Finance!

Instead of deficit finance we offer you a capital expansive high growth environment, a small non interfering Government which retreats from crowding-out your business and we offer you a broadly empowered consumer class willing to buy your locally developed products. This is surely a partnership opportunity to create ROI. Our budget increases capital expenditure at the expense of bloated Government Wages.

Table 2

		2016		2016
		ANC		PAC
		R Billion		R Billion
GDP		4,500		4,500
Tax%GDP		30.00%		30.00%
Revenue		1350		1350
	Labor		Labor
Expenditure	est.		est.
Economic Affairs	119.2	238.4	33.7	148.4
Defense and Public Safety	127.05	181.5	38.1	91.5
Admin	66.33	73.7	19.9	33.7
Education	267.75	297.5	80.3	207.5
Health	151.56	168.4	45.5	68.4
Local Dev Infrustructure	127.82	182.6	38.3	92.6
Social Services	33.5	167.5	10.1	500.0
Debt Service	0	147.7	0.0	207.7
	893.21	1457.3	265.903	1349.8
Deficit		-107.3		0.2
Gov Wages as % of Exp		61.29%		19.70%

Minister, we dispute in the strongest terms your claims that R816 Billion (Education, Health, Local Development and Social Protection) is spend on social uplifting. Our estimates - of the R1,450 Bn expenditure as much as R893BN is not spent on social uplifting but is spent on your own wages. What is created is a budget that is presented to help the Poor, but is actually crafted to help the Party Members (including those of the Democratic Alliance). This wage bill has contributed today to South Africa bearing the shame of being one of the most unequal societies in the world.

African Socialism proposes :

A universal Social Grant to EVERY South African of approximately R 900 per month. (R 500Bn per year in aggregate). This grant is three times bigger than your proposed expenditure and is without qualification. (All equal under African Law). No one may appropriate or attach these payments or use them for the purposes of debt reclamation. Adults receiving these grants on behalf of minors will be subject to rigorous audit.

An across the board cut of two thirds of Government Workers (approximately 2 Million). Yes look to your left Minister and look to your right. If you implement our budget then two out of three of you will be gone.

Immediate move of Parliament to Tswane. Reduction of 50% of Govenment Ministries.

An increase of R 100 Bn in Capital Expenditure in Education. Replace retrenched teachers with computers, bandwidth and learning aids.

We propose a reduction in budgeted expenditure with the IDC and Economic Affairs departments as these would be far better run by the private sector.

We reject the encroachment on capital gains and property transfers imposed by this budget. A rising Property market and fair ROI on Capital are cornerstones of a high growth economy. Both the ANC Government and the official opposition have grown accustomed to the perceived easy pickings of property and capital tax. With a higher growth in GDP this is not required.

The above cuts in the Government wage bill will dramatically reduce expenditure across all categories and allow for our increase in social grants

The revolution never sits comfortably with the incumbents. We fully understand that this budget will turn 2 Million Government workers into 2 Million Job Seekers. Minister, I understand that to people like yourself that have little private sector experience, talk like this can make you uncomfortable and you will surely find great support from the Democratic Alliance to support retention of your bloated Government Sector. I ask you both to put aside your selfish motives for a moment and consider what a stimulus this new arrangement would create.

Rather than the failed attempts at the trickle down effect, African Socialism injects immediate bottom up empowerment. Rather than paying R 30 000 a month to a non productive Government official we propose paying 32 Social Grants of R 900 each. In the case of paying a Minister R 2 Million per year, we are proposing to pay out 200 social grants. In place of the Presidents daughter earning 10 times that of her student colleagues, we will have 20 bursaries. In place of blue light cavalcades with R 30 000 per month drivers and security guards, we are proposing 20 Million fully fed and clothed children. The expenditure of the rich and middle classes has a propensity for imported goods. The grant recipients tend to spend their money locally. Under African Socialism we can expect multiplier effects from the lowest levels of our economy.

What of the 2 Million new job seekers? We are asking you to do nothing more than the rest of us have been doing for the last 20 years of independence. Get up in the morning, find productive employment and business. Help us to pay rather than spend the tax bill of R 1 350 Bn. Minister, your Government has created a work ethic where South African, particularly young South Africans refuse to do blue collar jobs in the private sector at a minimum wage of R 3000 per month and seek instead to get Government Jobs where they can be paid “R 10 000 Per month”. This has resulted in massive immigration of foreign workers who have come to fill private sector blue collar positions.

Minister as you yourself said in your budget speech, we are a resilient Nation. Show us that you and two million of your colleagues are part of that resilience and you can swim with us in an extended private sector. In the private sector you don't have to worry about travelling business class or buying an expensive car. You only have to worry about earning it. Years of living off tax revenue that grows faster than GDP, may have given you an over exaggeration of the importance of Government workers, but it remains one of the truisms of macro economics that you cannot create Government employment with out first removing the equivalent opportunity from the private sector.

We propose to update our policy on African workers. The borders of Africa are colonial borders. We welcome African immigrants. There is a catch. We expect foreign workers to immediately begin contributing to the Fiscus. The minimum we require is the cost of a social grant. If you displace a South African worker we expect you to pay us the social grant that we will have to pay them. For example if you come to South Africa with a wife and 2 children we expect an immediate tax contribution of R 4000 per month. Your residence permit will depend on your punctual payment of this tax.

In exchange for your tax compliance, we will grant no nonsense residence and full citizen ship after 10 years and will then pay you the social grant.

To the rating agencies, our proposed budget should send you immediately to re-rate South Africa positively. Getting rid of the doom of the deficit and the parasitic tax class that currently squats like a toad on our growth rate will change our economic structure. You can revisit the forecast assumptions in Table 1 and you can replace this with an improvement in the current account, a strengthening of our currency and most importantly an increase in fixed capital formation as we grow with a more balanced mix of Government labor and infrastructure renewal.

MaAfrika this is not Voodoonomics, we are proposing a reduction of Government wages from 61.29 % of expenditure to 19.70% of expenditure. Under the current proposed budget of the Honorable Minister of Finance and the ANC, we put their party members and supporters first and the poor a long way back. They make no substitute away from inefficient labor. African Socialism takes resources away from the connected few and puts it back into the hands of all South Africans.

Minister, this African Socialist budget may sound like madness to you. It will not sound rational and I will not try to convince you because as Bertrand Russel said, “You cannot make a man understand a rational argument, when his wages depend on not understanding it”. I must assume that it will require much more than rhetoric to create understanding.

Mafrika, what you are hearing is not the sound of madness,

But the sound of revolution.

Near or far as the eye can see,

Rise up and cry,

Azania shall be Free.

Philip Copeman is Project Leader of TurboCASH Accounting and a member of the PAC. He writes here in his personal capacity.

Spreadsheet of data used for this article

Budget%202016Feb26.ods

[Philip Copeman]

Either I just don't get it, or our South African Executive is leading us into the Valley of Death. We have SARS patting themselves on the back this morning for collecting just over R1Trillion in Tax or 26% of GDP, but we have the Minister of finance telling us (In Feb 2016) that he has budgets to spend of R 1,350 that rely on a 30% collection. That effectively leaves us R 300BN short!

Treasury's monthly debt statement is a memorandum that plots the destruction. Is no one going to hold the executive to the fact that in Feb they promised us a Deficit of R 107 Bn, but now by their own estimate 6 months later this is going to be R 192 BN?

In a simplistic comparison, dropping all the naughts – South Africa is like a family that earns R 10,000 per month and spends R 13,500 and uses a loan shark to fund the difference. We now spend more on debt that we do on the poor. Our solution is simply to seek an “innovative one - day new issue and tender switch transaction” Gordhan's words, not mine. See Treasury's rollover strategy where it all comes to a payment head in 2028.

We basically have the Minister of Finance telling us how negative we are, while our bloated Government Sector, rubber stamped by DA, Cope, IFP and EFF, borrow ever more money for their own salaries and leave our children to pay for it in 15 years time.

The worst is that they are buoyed on by an electorate, that is a never ending que of the desperate vote sellers calling for even more handouts. This puts us in the trap that no opposition movement can even suggest a debt free strategy and hope to get more than 1% of the vote. The only choices available to us are those offered by parties that, for a suitable fee, will keep the scam going and kick the bucket down the road to oblivion. The worse it gets the more we promise.

Can someone please tell me that I am wrong? I want to wake up and know that everything is OK and I am just being an alarmist.

http://www.treasury.gov.za/comm_media/press/monthly/1611/mpff.pdf