MTBPS — We must reimagine a different type of economic framework to avoid massive societal breakdown

The upcoming Medium Term Budget Policy Statement to be delivered on 26 October 2022 by Finance Minister Enoch Godongwana needs to respond to the real context of the economic crisis as experienced by millions of workers and their families every day. Many households continue to struggle to absorb the escalating living costs.

The current economic stagnation is proof that we cannot expect an economy based on laissez-faire free market principles to solve the issue of poverty, unemployment, and income inequality. The post-Covid recovery has highlighted the importance of government involvement in redistributing resources to the poor and marginalised communities.  

About 15 million South Africans currently live below the food poverty line, and the ‘expanded’ unemployment rate is sitting at a record of 44%. These are the statistics that should inform this year’s Medium Term Budget Policy Statement (MTBPS). The nation needs a clear strategy to help stimulate pro-poor growth and regenerate the economy.

In response to this economic stagnation, the government should stimulate the economy by doing the following: increase investment in the economy through infrastructure development due to its multiplier impact on growth and economic development; increase funding to the “training of layoff schemes”; and increase wages to motivate workers and create an environment that is conducive to create demand for goods and services.

Government should also provide funding to worker cooperatives to take over closed factories or those in liquidation/insolvency and nationalise companies that are not doing well in key sectors of the economy to retain skills and jobs. There is a need to increase social grants and use infrastructure projects to create decent permanent jobs.  

A new macroeconomic policy framework is needed because government cannot afford to rely on dangerous levels of inflationary borrowing to meet its obligations. To avoid a possible massive societal breakdown, government needs to reimagine a different type of economic framework which brings more people into the mainstream economy. The nation cannot afford to remain locked in an austerity framework because of the fear of ratings agencies.

At a global level, there is a need for alternatives in terms of credit ratings agencies that consider the developmental needs of a particular emerging economy. The biased and punitive approach of the dominant rating agencies has proven to do more harm than good.  

Workers also expect a coherent plan to fix our ailing SOEs. This needs to be expedited because we remain opposed to any plans to privatise them. There is an urgent need to close tax loopholes for the rich and illicit financial flows, illegally taking away about R147-billion annually out of the country.