February 22, 2024
Unit 106, Building 17
Waverley Business Park
Wyecroft Rd
Mowbray
Cape Town
7925
legalofficer@unitebehind.org.za
Mr Enoch Godongwana Dr Duncan Pieterse
Minister of Finance Director General: National Treasury
minreg@treasury.gov.za DGRegistry@treasury.gov.za
media@treasury.gov.za
Memorandum: Budget 2024
#Unitebehind notes the reduction in spending, adjusting for inflation, in the near term with the plan to increase spending again for 2026/2027. See the table below for these calculations.
R’ 000 2023/24 2024/25 2025/26 2026/27
| Consolidated Nominal Expenditure | 2 268 857 475,14 | 2 368 996
137,82 |
2 471 396
289,17 |
2 597 803
566,83 |
| Actual/Expected
Inflation |
4.89% | 4.70% | 4.60% | 4.50% |
| Inflation Multiplier | 0,955109838 | 1 | 1,046 | 1,09307 |
| Adjusted Total | 2 375 493 776,55 | 2 368 996
137,82 |
2 362 711 557,52 | 2 376 612
263,47 |
| % Change | -0,27 | -0,27 | 0,59 | |
| Change in Spending | -6 497 639 | -6 284 580 | 13 900 706 |
There is insufficient information on where the associated budget cuts will come from. It seems that the cuts are premised on government departments finding efficiencies and cutting costs themselves. Efficiency in expenditure is, of course, an important goal to be pursued but it seems that there is no overall policy or controls to drive this process. Therefore, it is likely that the budget cuts will happen in an ad-hoc and disorganised manner, which may cause dangerous disruptions to crucial services. Please provide information on any policies that will direct the anticipated budget cuts.
#UniteBehind understands that the National Treasury is under intense pressure to consolidate and pay off South Africa’s national debt. However, our levels of debt are not as high as many emerging markets. Further, we have high amounts of foreign exchange reserves. Austerity is a self-defeating cycle: we will lose GDP growth and, therefore, reduce revenue, which will increase the need for further funding through debt. Our problem is that our growth rate is lower than the interest rates on our debt. Therefore, a concerted effort should be made for local lenders to rake over the country’s debt and reorganise our debt to favourable interest rates.
Crucial to refinancing our national debt is increasing lenders’ trust in our institutions. Thus, arresting state capture and increasing accountability and financial controls take on increased significance. Of great concern is that only R200 million is earmarked for 2024/25 for implementing the recommendations of the State Capture Commission (SCC) and Financial Action Task Force (FATF). Further, this expenditure is listed as a single line item, without any information on how the costs will be broken down between the SCC and FATF recommendations or which recommendations will be focused upon. Please provide further information on the breakdown of this line item.
We applaud the decision not to include inflationary increases to tax brackets, which essentially increases the tax rate for the middle class and the wealthy. However, #UniteBehind calls for an increase in tax rates for the upper two tax brackets. Further, we call for the expeditious introduction of a wealth tax.
The Government Employees Pension Fund (GEPF) is also over-funded. To quote Duma Gqubule, “A private sector pension fund must be fully funded because it can go bust. But there is no scenario where the government can close shop and have to pay the pensions of 1.2 million public servants on the same day. … If [the GEPF] reduced its funding to 50% it would still be able to pay pensions as if it was fully funded.”
Passenger Rail Agency of South Africa (PRASA):
Reduction in capital spending states that it is 0.7% per year on average. But it is actually 4.7% per year. See the table below for the relevant calculations.
| (R billion) | 2023/24 | 2024/25 | 2025/26 | 2026/27 |
| Capital | 12,9 | 11,6 | 12,1 | 12,7 |
| “Other Capital” | 5,89 | 1,85 | 1,93 | 2,02 |
| Fleet Renewal | 6,9 | 5,28 | 5,52 | 5,78 |
| Signalling | 0,09 | 2,52 | 2,63 | 2,75 |
| Refurb Metrorail | 0,05 | 1,73 | 1,81 | 1,89 |
| Refurb MLPS
Total |
– | 0,2 | 0,21 | 0,22 |
| 25,83 | 23,18 | 24,2 | 25,36 | |
| Inflation Multiplier | 0,955109838 | 1 | 1,046 | 1,09307 |
| Adjusted Total | ||||
| 27,04 | 23,18 | 23,14 | 23,20 | |
| % Change | -14,29 | -0,19 | 0,28 |
PRASA is spending around R6 billion p.a. on fleet renewal but most of the new ‘blue trains’ are not even running. Trains only run, at most, once per hour – only one or two sets are required per line. Further, our current depots do not have capacity to service new trains.
#UniteBehind welcomes the forecasted spending on signalling, but we doubt whether the project will actually occur with the speed that is needed. Last year, only R89 million was spent on signalling.
Increasing private sector involvement is a key part of the 2024 budget review. However, no such plans are earmarked for PRASA. Crucial to increasing private sector involvement is the expeditious finalising of the National Devolution Strategy, which will open up public-private partnerships (PPP), such as the Gautrain Rail system. Crucial to the Strategy will be incentivising PPP while keeping commuter rail efficient, safe, and affordable.
Eskom:
We applaud the program to increase electrification to 300,000 households over the next three years. However, this program does not square with the decision to decrease allocation to the Integrated National Electrification Program by R7.8b over this period. Therefore, it is unclear how this goal will be reached. Please provide substantiation for this decision and how the goal will be reached given the decrease in forecasted spending.
Further, we are fervently against the anticipated plan first bid window for 2000MW under the Gas Independent Power Producer Procurement Program. This program has not been fully ventilated in the public domain and is subject to much opposition from environmental groups. It is the subject of ongoing public participation in terms of the new draft Integrated Resources Plan. Resources and plans should not be earmarked for this plan before the revision of the Integrated Resources Plan has been finalised. Please provide the basis upon which the decision to approve such allocation was taken.
Lastly, #UniteBehind opposes the decision by the National Energy Regulator of South Africa (NERSA) to approve a 12.74% electricity price increase effective April 2024. The National Treasury must recognise the vast negative effects such an increase will have on the poor. National Treasury must engage with NERSA to ensure that the anticipated increase only affects middle and upper-income consumers and businesses.
Demands:
In addition to the above requests for substantiation, #UniteBehind demands the following:
- An increase in tax rates for the upper two tax brackets.
- The expeditious introduction of a wealth tax.
- A significant reduction in spending on the GEPF.
- An appropriate increase to the allocations for implementing the recommendations of the SCC and FATF.
- A reversal of the decision to cut PRASA’s capital spending.
- A directive from the National Treasury for the Minister of Transport to expeditiously finalise the National Devolution Strategy.
- Greater control and involvement by National Treasury over the procurement policies and procedures of PRASA, to ensure efficiency and avoid corruption and maladministration.
- A program by National Treasury to facilitate the expeditious rehabilitation of PRASA’s infrastructure and the crucial resignalling program.
- A reversal of the decision to fund the increase in the procurement of gas power in South Africa.
- Engagement by National Treasury with NERSA to scrap the electricity tariff increase for 2024/25 for poor households.
We demand a response to contents of this letter by Friday 01 March 2024.