Chair, when the Minister delivered the Budget Speech on 26 February 2020, he said amongst other things that as a major step towards fiscas sustainability, today we announce a net-downward adjustment to money interest expenditure of R151.1 billion over the next three years relative to the 2019 budget projection. He further said that this reduction in terms of government expenditure will apply mainly to conditional grants for provinces and municipalities. Specifically he said that there's going to be reduction of R14.6 billion in terms of the human settlements budget in the medium term expenditure framework which could have provided more than 100 000 houses.
A R2.6 billion reduction in the municipal infrastructural grant, which is happening despite the huge infrastructure back log in municipalities.
A R13.2 billion reduction in the transport spending, mainly Prasa. Prasa is mostly servicing working class and poor households and workers and it includes the reduction [Inaudible 18:30:30.] suspension of the expenditure which was supposed to happen in the integrated public transport networks and Buffalo City, Mbombela and Msunduzi municipality.
There is also a cut in terms of education infrastructure which has been reduced by R5.2 billion, meaning that [Inaudible 18:30:46]; the pit latrine toilets are not going to be eradicated in the foreseeable future. There's also a cut in terms of health care services of R3.9 billion which is happening amidst a pandemic that is threatening the whole world, Covid- 19.
There's cut in terms of the expenditure in the Medium-Term Expenditure Framework, MTEF, on public expenditure. There had been a proposed expenditure cut in terms of the Wage Bill of R160 billion.
Now, in basic economy dictum and understanding, all these reductions amount to an austerity measure. Anyone who denies that what was presented here as an austerity measure is either a fool, disingenuous or both. Because, what we have here is an austerity budget and the budget justice coalition correctly identified these on damming the submission to the Standing Committee on Finance that this is a policy framework that is defined by government spending which is not increasing in line with sectoral cost drivers or the Consumer Price Index, CPI. It is defined by regressive tax policies; it is defined by the reprioritisation of funds away from the investments in the public sector. That is what government has basically presented. Now, the other issue which is basic logic is that a reduction in government expenditure, the price, the country of an increased Gross Domestic Product, GDP, so when government draws back in terms of expenditure of more resources, it is going to have recessionary consequences. Meaning that the economy is not going to grow, unemployment is going to be higher. It means that the revenue base is going to shrink, meaning that the debt to GDP ratio is going to increase.
So, instead of achieving what you think you are going to achieve with reduction and expenditure, you are going to achieve the opposite in terms of all those issues. It is basic economic logic; it is not sloganeering as you tried to claim when we debated the budget.
I want to call Dr David Masondo's attention to a book by Mark Blinth that speaks about austerity called the history of a very dangerous idea. Also, go and listen to Greece's former Minister of Finance, Ioannis Varoufakis who resisted austerity until he was kicked out of office.
The austerity measures in Greece were introduced at the same time with Portugal and Portugal bailed out of the austerity measures and implemented a contrary economic policy model and Portugal's economy grew far much faster than the problem and the crisis that Greece was found in due to austerity measures.
So, to ever think that we can survive the economic crisis that is going to be worsened by the fact that COvid-19 is disrupting globalisation, we are not going to get out of the economic crisis due to your austerity budget.
Instead, we are guaranteed to face a recession. Even that 0.9% economic growth is not going to happen with the kind of budget that you have proposed here. There are a few issues that you must deal with in terms of some of the low hanging fruits that can be harvested.
One is to change the procurement the procurement legislation, not just the Public Procurement Bill that has been proposed now. You should change the Municipal Finance Management Act, MFMA and the Public Finance Management Act PFMA to insist that all the goods and services that the state procures must be locally manufactured and manoeuvre the value chain.
We are currently trying to roll out this poorly conceptualised renewable energy strategy, why isn't that the solar panels are not all being manufactured here in South Africa? It was going to generate much more economic activity that is going to boost economic growth and development in South Africa. The other issue I want to speak to is that African bench reformed nuclear of the state bank has got the infrastructure and the expertise to put the bank that deals with all of these issues.
Three areas that you must maximally collect taxes on are e- commerce, multinational corporations, almost all of whom are involved [Interjections.] and then the component will be informal traders, villages, townships and cities and in that way you can the treat these things differently.