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SA’s Finance Minister Enoch Godongwana’s austerity measures hasten ‘Arab Spring’

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Picture: Phando Jikelo/African News Agency (ANA) – Minister of Finance Enoch Godongwana delivers the Mid Term Budget Speech at the City Hall on October 26, 2022.

By Professor Patrick Bond

The fallout from Finance Minister Enoch Godongwana’s austere, medium-term budget on October 26 is likely to be severe. In spite of allocating more than R2 trillion, Godongwana’s squeeze on vital goods and services, and his nurturing of historic parastatal agency corruption, are deeds that won’t go unpunished by an increasingly frustrated society.

While the July 2021 rioting in KwaZulu-Natal and Gauteng may have acted as a spark for former president Jacob Zuma’s arrest, it actually reflected the powder-keg conditions in society. Godongwana’s predecessor, Tito Mboweni, built that explosion to sky-high levels when in mid-2021, he removed the tokenistic R350/month survival grant, which 11 million people depended upon for direct income support.

This was recognised by President Cyril Ramaphosa when he reintroduced that grant a few days after the dust settled. But Godongwana’s orders to Social Development Minister Lindiwe Zulu were to restrict its distribution, so recipient numbers fell to 7.5 million this year. Also, the buying power of the R350/month originally introduced two years ago has fallen by more than 11% due to inflation, and Godongwana has refused to raise the monthly grant accordingly.

If, as former president Thabo Mbeki fears, there is an “Arab Spring” coming to South Africa – that is, recalling the 2011 grassroots democratic uprisings against ossified, Western-oriented oligarchic, despotic regimes– then Godongwana can be credited for inviting it sooner than later.

As the Institute for Economic Justice points out, 2021-22 spending per student will shrink by 3.5% by 2025/26, at a time when Covid ravaged the teacher workforce, and there are 73 000 vacant posts in public education. Home Affairs will suffer a 9.2% cut in real spending this year alone just when the state is trying to modernise and as xenophobia pulses among reactionaries. Public healthcare faced austerity in February 2020 when Mboweni cut nearly R4 billion from the budget just as the world’s worst-ever pandemic was looming down, and Godongwana continues the tradition with a massive cut in real terms next year, of at least 5.5%, with 39 000 vacancies unfilled. Employment programmes are being cut, in real terms, by 5% even though unemployment is still rising.

In contrast, vast sums are being allocated by Godongwana to dubious sources. The biggest immediate transfers of funds to State-Owned Enterprises are R3.6 billion to the Gupta-captured, bankrupt arms manufacturer Denel. Through its ally, Armscor, the company’s military output goes to two objectionable recipients: a dozen Nato governments which buy SA weapons, and SA National Defence Force troops fighting in northern Mozambique on behalf of Paris-based TotalEnergies, Houston-based ExxonMobil and other imperial and sub-imperial oil companies (in turn, inviting terror threats in Sandton from the Islamic insurgents).

But the vast bulk of give-aways is still coming: up to R260 billion in taxpayer gifts to Eskom’s lenders, as the parastatal’s vast liabilities are shifted in next February’s budget, no doubt resulting in further social spending cutbacks.

The debt relief plan for Eskom stands in contrast to the position taken by civic groups and the second-largest labour network, the SA Federation of Trade Unions, who reject repayment of several hundred billion rands worth of loans that were tainted by former Eskom chair Valli Moosa’s award of the main Medupi and Kusile contracts to Hitachi. That deal, successfully prosecuted as bribery under the Foreign Corrupt Practices Act (when Moosa served on the ANC Finance Committee), gave vast profits to Chancellor House, in turn, used by the Zuma-era ANC during the 2010s.

It is “Odious Debt” under international law, and should not be repaid, because the lead lender – the World Bank at $3.75 billion – knew perfectly well that this blatant corruption was in play at the time former Finance Minister Pravin Gordhan raised the money in April 2010. Even Business Day editorialised against the Bank loan as well as similar credits from the Western-dominated African Development Bank and US, UK, French and German credit ratings agencies.

So it is no surprise that Eskom, last week, also got the Cabinet’s approval to borrow R150 billion more at partially-concessional rates for a “de-carbonisation” project, the Just Energy Transition Partnership. But because money is “fungible” (can be shifted within a Treasury from different revenue sources), that supposed climate-friendly deal allows Eskom CEO Andre de Ruyter to raise his desired R85 billion for gas-fired power plants, including a 3000MW generator at Richards Bay.

There, the World Bank and Transnet have plans for a gas terminal, whose nearest source for inputs of liquefied natural gas will be Western Big Oil from Mozambique’s Blood Methane fields, where already several thousand Cabo Delgado residents have died, and a million people were displaced.

This is not only a potential source of Islamic extremist threats to Sandton if we are to believe the (credibility-scarce) US Embassy. It’s also the site where Cyclone Kenneth devastated the coastline with 225 kph winds in 2019, caused by the fast-heating Mozambique Channel, in turn, caused by climate change, in turn, caused by CO2 and methane emissions. The methane is 85 times more potent than CO2 over the next 20 years, and instead of extracting it, a just world would pay the $8.5 billion as a grant to Mozambicans as a climate-reparations down-payment.

These are some of the most intense contradictions in Godongwana’s approach. But the most banal forces in South African society prefer to ignore them. The Rand strengthened, and the Johannesburg Stock Exchange rose. Godongwana’s February relaxation of exchange controls allowed R3 trillion of institutional investor funds to escape South Africa, and the currency collapsed since then from R14 to R18.

Celebration of his speech was most pronounced in Business Day, where Hilary Joffe celebrated the coming primary budget surplus, which means “government’s debt-to-GDP ratio starts to flatten and stabilise two years earlier than expected. If the ratios are remarkable, so too is the way the minister is budgeting to use the space they provide,” including major cuts to civil services post-inflation wages.

Trade unions and others in progressive civil society are furious. After all, says former Cosatu leader – turned Cope politician – Mbhazima Shilowa, “this is a government that has the most trade union leaders since the dawn of democracy in its Cabinet, including the president,” and former metalworker unionist Godongwana “reinforces the view that is taking hold in society, especially among trade union members, that when we are in leadership positions, we are in it for ourselves and that we act no differently than the most despicable employers.”

Patrick Bond is Distinguished Professor in Sociology at the University of Johannesburg.