Litnet

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As the ANC gets massacred by the third estate, the DA and Julius smile. But, in truth, it is only Julius who has a confident smile. In a country where 87% of voters are black/African, the DA has a ceiling. Julius doesn’t.

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DA election manifesto, 2024 general election

We are a nation beset by disillusion, anguish, depression. We are three months from a general election, and so many of us just don’t know what to do with our precious vote. We know the spoils will eventually be divided between the ANC, the DA and the EFF, but somehow none of these parties gets our wholehearted affection, our loyalty. The ANC and the DA both have a core of loyalists who will reach out from their graves to vote for “their party”, and it is good that it should be so, but now their enthusiasm seems to be more manufactured than genuine. Only the EFF seems to be able to get the screaming going. What could be worse for our country?

The “Big Two” are in limbo, besieged by a merciless press pointing opinion in – what direction, I ask you? As the ANC gets massacred by the third estate, the DA and Julius smile. But, in truth, it is only Julius who has a confident smile. In a country where 87% of voters are black/African, the DA has a ceiling. Julius doesn’t.

So, what of the DA? Does its manifesto earn our respect, our vote?

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We are quickly heading for an all-time record budget deficit.

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The DA’s plans

The DA’s election manifesto, titled The DA’s rescue plan for South Africa, is short: 53 pages, of which about 23 are large colour photographs, mostly of happy, smiling models, with the remaining 30 pages restricting themselves to seven areas of interest. These are: employment and job creation; electricity and water; crime; a capable state; poverty and inequality; education; and healthcare.

Each section begins with notes on what would happen should the “DA’s values” now apply to that section. Then follows (of course) a section on “How the government’s failures affect you”, and then a section on how “the DA will rescue South Africans” from this ANC mess, which section includes a boxed note on “Our bold solution” (presumably the DA’s most important intervention in this area). Also, there are boxes on how things are done that much better in DA-governed areas.

The seven boxed “bold solutions” are, in the order of the above sections: “Youth employment opportunities certificate”, “Prosumers”, “Decentralisation of police”, “Outlawing of cadre deployment”, “Scrapping BBBEE in favour of meaningful empowerment (ie, Sustainable Development Goals)”, “Ensuring that our children’s interests count” and, finally, “Lowering private healthcare costs and guaranteeing a package of services to all”.

There is plenty to chew on in this document – in much of the developed world, people who generate their own electricity are paid to supply their surpluses to the local grid – why not here also, the DA asks? And why not decentralise some policing functions, if they can clearly be more effectively delivered by a locally structured force? (How you get this right, I’m not sure, but the idea is worth exploring.) And any initiative to improve the literacy and numeracy of beginners at school – surely such ideas are worth a try?

I wish to look at just two of the “bold solutions” before concentrating on the financial aspects of the DA’s work, which will include an analysis of another two of these “bold solutions”.

Firstly, the “Youth employment opportunity certificate”. This is, in my opinion, a horrible idea. It seems to work like this: a person aged between 18 and 35 and who has been unemployed for some time, qualifies for a government certificate with the above title. This certificate entitles the holder to apply for employment, and in his/her case, the employer will be exempted from paying the national minimum wage. Crudely put, the certificate holder has a sandwich board around his neck reading, “I’ll work for my food.”

No, no. It is not the job of the government to allow its most vulnerable and powerless citizens to endure wholesale abuse. The minimum wage is horrifyingly low (I met a young, single mother making and serving milkshakes at a national fast-food chain. She earned the national minimum wage, and at the end of a day of working for ten hours, took home about R200 (minus the hours of loadshedding – they were immediately deducted), and she paid R45 for the taxi to and from work. And even some hugely profitable supermarket chains pay this wage to many staff.

Guys, that is bad enough: to pretend, as the DA’s manifesto does, that their piece of paper is a wonder and will create two million jobs is a myth of EFF proportions. Instead, it is a licence for exploitation on a grand scale.

And then there is crime. Here, the DA manifesto suggests that they will halve the amount of violent crime by, inter alia, “reclaiming the streets from gang violence”. A fourfold strategy here: develop school awareness programmes; invest in youth development programmes; develop community partnerships; and create early detection programmes to detect substance abuse. That, with respect, appears a bit wimpish in the business of dealing with drug gangs. Halve violent crime with school awareness programmes? Forget it.

Now the finances. Here, I have inspected not only the manifesto, but also Deon George’s Alternative Budget and his Responsible Spending Bill, for herein (certainly in the Alternative Budget) some costs are applied to some of the promises of the manifesto – the manifesto itself is deadly quiet on costs.

Firstly, with regard to government income, the DA will not countenance any new taxes, nor any rise in the rates of the existing taxation. In fact, they wish to cut the tax on petroleum products by R19,2 billion in year one of the budget cycle, by R41 billion in year two, and by R65,5 billion in year three. So, taxation income has a clear ceiling, similar to what it is today, minus the foregone petroleum levy.

They have a formula to control state expenditure: it should not increase at a rate higher than the growth of South Africa’s GDP. By keeping things at this level, they believe that the state will borrow less (as it has a disciplined growth in expenditure now) and that, over time, state borrowing will thus flatline; as existing loans get repaid, total borrowing will drop. And reducing state debt is, for the DA, a clear objective.

No additional funding for state-owned enterprises (“not a cent”) will be permitted, for they have, according to George, already soaked up R331 billion in additional financing from the National Treasury over the last ten years. Thus, we have an approximate ceiling in government income, and with the fuel levy being downsized, this ceiling is low. And, of course, under these circumstances, existing expenditure will absorb all of this income. So, no new programmes?

That is a situation that is not easy to sell to a restless caucus in an election year. There have to be new programmes. What is the DA to do? George presents a selection of new programmes in his Alternative Budget. They are:

• Increase in national pensions – this will cost, over three years, about R4,5 billion.
• Basic income grant, SRD continuation – the BIG is converted to a work seekers grant, provided recipients prove they have been searching for work – over three years, R70,5 billion.
• Additional funding for the NPA – over three years, R6 billion.
• Additional funding for the SIU – over three years, R6 billion.
• Solar power incentive – over three years, R8 billion.
• Additional funds for a proposed increase in the childcare grant from R510 monthly to R750 – over three years, R129 billion. Surely a worthwhile project if affordable.
• Change in NSFAS funding – over three years, R29 billion.
• Funding for a “new” Scorpions Unit – over three years, R7,5 billion.
• The manifesto recommends the extension of the VAT zero rating to a further package of foodstuffs. While this is not an expense, it is rather revenue foregone, which has the same budgetary impact – over three years, R66 billion.

That’s a start, but now the manifesto calls for many new programmes that have considerable costs, and which are not in the DA’s Alternative Budget. Here they are.

Firstly, another suggestion that would drop Treasury income: a larger section of a working man’s pay, if paid over to a retirement fund, should be tax-free. No figures are provided as to the tax foregone here.

Next, in the manifesto, we find a number of recommended projects that have not been costed, nor has their cost been included in the Alternative Budget. These are:

• Expand SARS’s capacity.
• Stabilise the SOEs. The DA is committed to an “orderly unbundling and restructuring of Eskom – a central requirement for achieving a well-diversified and competitive energy generating sector”. How this can be done in an environment of “not another cent” I can’t imagine. And the Post Office? “Not another cent”?
• Provide more one-stop shops for SMMEs.
• Capital spending must increase from 13% of GDP to 30%. (This amount is huge – the DA suggests public-private partnerships, but how much does the “public” part contribute?)
• Invest in the electricity grid.
• Build more capacity for renewable energy technology.
• Reuse industrial water.
• Improve water treatment works.
• Strengthen IPID and also SAPS’s forensic capacity.
• Build a dedicated training facility for POP officials.
• Create an Anti-Corruption Commission.
• Provide sufficient shelter and rehab facilities for battered women and children.
• Provide “sufficient” social workers.
• The job seekers grant will now require a nationwide bureaucracy to assess whether recipients are applying for work.
• Invest more in research.
• Create a National Prescription Registry.
• Increase the funding for the CCMA.
• The DA’s national healthcare model: the DA has a model unlike either the present South African system or the proposed NHI. Yet, they present it in their manifesto as reducing medical costs for everyone. (This, they say, will follow from increased competition in the medical profession – in a country short of doctors, this seems unlikely.) It is also presented as making an adequate package of medical facilities available for all. This model involves the reinsurance of some expenses through a secondary insurer. How it works will only become understandable when details of the system become available and when costs are clearly spelled out. Right now, their model relies on state subsidisation, but we are not told how much this (very large) state expense will be.

None of these items have been included in the DA’s financial calculations, while they are stated ambitions in their manifesto. There is a lot of money on the table here.

An all-time record budget deficit

We are quickly heading for an all-time record budget deficit. To bring this all into balance somehow, the Alternative Budget suggests 11 items of cost savings that can somehow be removed from state spending. We will consider seven of these, which together add up to 97% of the Alternative Budget’s total “DA net cuts”. These seven are:

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With the DA’s Alternative Budget, if we add the projects their manifesto promises us, but their budget has forgotten about, and subtract the startling savings they do remember, but which are EFF economics, we end with a bigger budget deficit than the one we currently endure.

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• The first and third savings items are employee cost-related and involve, firstly, a three-year wage freeze for all state employees not covered by the Occupation Specific Dispensation; and, secondly, the “removal from the civil service of over 20 000 officials at salary grades of above R1 million a year, at no cost in terms of retrenchments”.

Quite frankly, both recommendations are naïve. Anyone who has been in a budget construction process knows that they frequently begin with meetings of senior Treasury officials and a few politicians. Inevitably, they talk themselves into believing in a wage freeze, or a “1% or 2%” salary hike for the next year, because “there is no money”. Well, shortly thereafter, they learn that conditions of employment, national bargaining arrangements, labour legislation and strong trade unions make nonsense of their bold predictions. We live in a highly legislated labour world, and the perceived consequences of even a well-conceived draft budget are routinely pushed aside.

Somehow, dismissing/retrenching over 20 000 senior civil servants with little or no retrenchment costs, suggests that someone in the DA believes that these 20 000 staffers earning R1 million or more, who do so little work that their colleagues can easily take on their load without filling their posts, will just give up their senior jobs and go away if a DA government wants such. This is EFF economics.

• The “DA procurement model”, which will save South Africa R166 billion over three years, is to dump BBBEE and, in its place, suggest to companies that wish to do business with the government, that they should have programmes that devote money to projects that apply themselves to the United Nations Sustainable Development Goals. But not too much money, because the marks from this exercise will hardly make any difference in tender adjudication, which will turn on competence and experience now.

In George’s notes, he suggests that dumping BBBEE will save the state “about 20%” of its entire procurement budget. In his Alternative Budget, he has simply billed this in as saving the full 20%. More EFF economics, I fear. Dr George needs to motivate this a tad more and a whole lot better.

• Irregular expenditure. There are three sorts of “bad” expenditure that get the auditor-general excited: firstly, “unauthorised expenditure”, which is expenditure that was not covered in a budget; secondly, “irregular expenditure”, which is expenditure for which the auditor-general was not satisfied that the paper trail, from first public advertisement to final payment, was complete for his/her staff to inspect and verify; and thirdly, “fruitless and wasteful expenditure” – the really bad one – which is when the auditor-general declares that the organisation has not got any benefit from the expenditure (ie, theft, penalties for late payment of VAT, staff standing idle while equipment is not functioning, etc). In the first two cases, there is no suggestion that the organisation has not had value for money from the expenditure; in fact, almost always, this expenditure is fruitful, but accounting procedures have not been adequate, otherwise the auditor-general would have deemed it to be “fruitless and wasteful”.

So, to do away with irregular expenditure will not save any cash – for the cash has gone to the company that built the reservoir as commissioned. It will merely show that the Department is now using SAP or some such accounting package that gets all the ducks in a row.

• Debt service costs. Here, R66 billion is expected to be saved over three years, and the trajectory of the savings rises as debt diminishes. A quick indicator of whether debt is to rise or fall is what is called the “Primary Budget Balance”, ie, the surplus that remains after one subtracts the organisation’s non-interest expenditure from its income. If the resultant figure is in deficit, the debt-to-GDP ratio can be expected to rise. Here, the DA’s Alternative Budget shows an appreciable tendency to less debt than the ANC’s 2023 budget.

However, the DA’s estimates are dependent on the savings that we are now inspecting being real, and the financial non-existence of the projects in their manifesto that we have found are not reflected in their Alternative Budget. Reverse them, and the DA-proposed position becomes worse than the ANC’s, and these proposed debt service improvements fall away.

• Road Accident Fund savings. We are given no motivation for these savings and can thus make no sense of them.
• Savings on ministerial travel, etc. I’m sure we all wish the DA success in this item, but, well, good luck!

The above items cover 97% of the DA’s “net cuts”. Regretfully, most will not be realised. With the DA’s Alternative Budget, if we add the projects their manifesto promises us but their budget has forgotten about, and subtract the startling savings they do remember but which are EFF economics, we end with a bigger budget deficit than the one we currently endure.

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I’d like to advise them to do more to their policies, add up their budgets better and learn to cooperate with the ANC.

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Summary

We have always felt that the DA does its thinking, studies models from across the world, adapts them to our needs, and presents them with great skill, and much of their manifesto shows that these disciplines are still in the DA. Their commitment to maintaining and increasing grants is highly commendable, as is their proposal to bring more foods into VAT-exempt status. Their concerns about diminishing state debt are well motivated and should be taken seriously, and their manifesto includes much of interest and many good ideas. But the last bolts need tightening, the final budget needs better costing, and they should give us, even if in appendices, much more detail about their thinking.

Yes, this is a more convincing manifesto than the EFF’s (what could be worse?), and if my choice were only between these two parties, I’d take the DA any day. But I’d like to advise them to do more to their policies, add up their budgets better and learn to cooperate with the ANC.

See also:

Election 2024: The Economic Freedom Fighters’ election manifesto

Manifesto: A new vision for South Africa by Songezo Zibi: a review