ANC, alliance partners push back on Treasury’s cost cuts ahead of 2024 elections

The ANC officials, the top brass of Cosatu and the SA Communist Party (SACP) are said to have held a meeting this week with Finance Minister Enoch Godongwana about National Treasury’s cost containment measures, which they believe could be detrimental to their 2024 election campaign. 

Daily Maverick understands that the meeting was held on Monday, 18 September, where all members of the ANC Top Seven were present, apart from President Cyril Ramaphosa and the party’s second deputy secretary-general, Maropene Ramokgopa, who are in New York for the United Nations General Assembly meeting.

The bone of contention revolved around Treasury’s lack of political nuance in relation to the cost containment measures it has outlined. This is despite the department being headed by Godongwana, an ANC National Executive Committee member.

Read more in Daily Maverick: South Africa’s Treasury Pressured to Water Down Spending Cuts

The ANC is looking to woo voters in next year’s provincial and national elections and they are trying to avoid losing popularity among supporters. It’s been predicted that the ruling party could fall below 50% of the vote – something that has placed considerable pressure on party leaders.

During the meeting, red flags were raised around the suggestion that retrenchments be considered in the public service. The ANC and its partners felt this should not be implemented, but they were in favour of giving civil servants the choice of taking a voluntary severance package or opting for early retirement. 

The tripartite alliance felt that the Social Relief of Distress (SRD) grant should continue, even if the amount is not increased in the upcoming Budget. A proposal around tax increases was shut down as it offered only a temporary solution to the country’s cashflow woes. 

There was also disapproval of the suggestion that certain government programmes be ended as a means to cut costs. Treasury has suggested this as a way to increase the SRD grant to R365 or R450 a month.

Cosatu wants the government to ensure that Transnet functions properly to ensure that the manufacturing and mining sectors can operate seamlessly. The union also believes that Eskom should improve its revenue collection from municipalities that owe billions.

One of the suggestions that received support involved the reconfiguration of the state, which would see larger departments absorb the functions of smaller ones. It would also eliminate duplication and overlap of functions across departments and entities. 

Because there was a clear disconnect between Treasury and the tripartite alliance regarding the cost-cutting measures, it was decided that smaller working groups would be formed to facilitate the process.

Treasury’s financial woes 

Daily Maverick’s Ray Mahlaka has written about how Treasury has found itself in trouble after a fall in commodity prices and a weakening of the economy due to power blackouts and logistics constraints (mainly problems at Transnet). These factors have bitten into the profits of companies that are consequently paying less corporate taxes to the government.

Early figures indicate that for the second quarter of 2023, corporate income tax collections were down by 22.5% compared with a year ago. Because of this, it is broadly expected that the government will face a revenue shortfall of between R30-billion and R60-billion this year.

At the end of August, Treasury sent a letter to the provinces, informing them that it faces “unprecedented” challenges for the current fiscal year. It has instructed departments and provinces to freeze hiring and advertising for new procurement contracts for all infrastructure projects (unless approved by Treasury). 

It recommended drastic cuts in spending on travel, catering, conferences and workshops. 

The finance minister will table the Medium-Term Budget Policy Statement in Parliament on 1 November. DM