Election 2024: The Economic Freedom Fighters’ election manifesto

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Instead, I’ll go for the jugular: “Yes, you are promising everything, but how is it to be afforded?”
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The EFF launched its election manifesto with much fanfare about a week ago, and nobody can complain about it not being comprehensive. For it spans 260 pages, is divided into 33 areas of interest, and this all includes a total of 1 485 commitments – these are numbered promises, the vast majority of which begin: “The EFF government will …”. Thus, these many commitments are not commitments to study and then decide on action; they are clearly phrased as actions that have been decided on, and must now be seen through. We know where we are with the EFF.

It is pointless to attempt to summarise this enormous document. (If you are interested, google “EFF Manifesto 2024”.) Instead, I’ll go for the jugular: “Yes, you are promising everything, but how is it to be afforded?” For, while the needs of our society are comprehensively set out in the EFF document (and most of us will disagree with much of it, but not on its commitment to detail), the EFF continues to pretend that heaven has no price, and that all can be achieved without considering the cost. We know that this is not so in the real world, and that a plan without a funding line is just a piece of paper. Reality demands money, and there is never enough of that to go around.

Three preliminary points:

  • Firstly, nowhere in the EFF document are savings in state spending offered – every one of their 1 485 commitments is to additional state spending. Subtract nothing, just add more.
  • Secondly, the state does nothing on the cheap. A state salary is a composite of about ten cost lines – salary, pension contribution, medical aid contribution, this allowance and that, etc, etc. The bottom line municipal appointee has a total cost to company of over R300 000 per annum, and a million rand post is, astonishingly, quite common. And the specification and tender system causes much bought by the government to be at prices the private sector finds unimaginable.
  • Thirdly, as I have mentioned, while the EFF manifesto lists project after project, and new expense after new expense, nothing anywhere is costed – no attempt is made, anywhere, to cost this massive cornucopia of delights.

Enough to make you suspicious?

Let me take just a small sample of the EFF list, and attempt to put a price to it, from two sections – once-off projects (mostly buildings and capital projects) and annually recurring projects (the cost of new staff, etc).

Once-off projects

 1.1 School improvements. The EFF document promises that all schools (there are about 25 000 schools in South Africa) will get two grass fields, two “pitches”, a swimming pool, a veggie garden, a library, science and computer labs, a gym, an adequate package of musical instruments, a back-up electricity source, hot and cold running water, and a sanitary toilet block. (At a rough stab, and assuming that 2 000 schools have adequate provision and don’t need this package, we have 22 000 schools requiring about R25 million each in this supplement, totalling R550 billion.)

 1.2 Facilities in all municipal wards (there are 4 468 municipal wards in South Africa). Each ward will have a satellite police station, a clinic, a library, a market and a multipurpose centre. Say 4 000 wards need this package, at R40 million each = R160 billion.

1.3  Hospitals. Each “district” will be supplied a 450-bed, 24-hour hospital. While “district” is undefined, this possibly adds up to 100 new hospitals at R2 billion each = R200 billion.

1.4 Every child from three years up will have to attend an Early Childhood Education Centre. While the document is silent on whose responsibility this provision is to be, the staff will be state employees, so we can assume that the state accepts the responsibility to provide about as many such facilities as there are schools – ie, about 22 000 new facilities, at R3 million each = R66 billion.

1.5 Ninety “astronomical observatories” are proposed for educational purposes. R10 million by 90 = R900 million.

1.6 A full harbour will be built at Boggoebaai (R30 billion), and nine other new harbours for “small-scale fishing fleets” (9 x R300 million = R2,7 billion). Total R32,7 billion.

1.7 Housing. Gone is the “RDP” two-bedroomed house – now, recipients will receive a three-bedroomed house, with all services including hot and cold water inside. The housing backlog is about two million houses, and the larger house will cost possibly R100 000 extra – so, 2 million x R100 000 = R200 billion extra. (We can readily predict that the present 2,5 million households that have two-bedroomed RDP houses will rise up and demand extensions – we will ignore the implications of this inevitable revolt.)

1.8 All students at schools (13,6 million) and all students at tertiary institutions (about 1,5 million) will be given tablets (schools) and laptops (tertiary). Say 15 million x R2 000 = R30 billion.

1.9 To be added to our educational stock: five teachers’ training colleges, five nursing colleges and five satellite universities. Building costs: 15 x R400 million = R36 billion.

1.10 A Sovereign Wealth Fund is to be capitalised (here an amount is provided) – R100 billion.

1.11 All the nation’s water problems, from dams to reservoirs to leak fixing, etc: “All water service amenities will be perfect by 2026” – cost incalculable, but say R200 billion.

1.12 Seven state-owned banks will be created – provincial, municipal, retail, agriculture, housing, social assistance and mining. Start-up costs and capitalisation possibly R1 billion each = R7 billion.

1.13 Nine state-owned companies are to be established in housing, roads, rail, cement, food supply, IT, pharmaceuticals, healthcare and mining. Start-up costs and capitalisation R1 billion each = R9 billion.

There is more, much more. The above adds up to about R1,5 trillion, which, if spent over three years, would amount to about R500 billion a year.

2 Annual, ongoing costs

2.1 Teachers in Early Childhood Education. The document suggests that the state will appoint 40 000 teachers here – how this will fill the requirement for a universal service, we are not told. R400 000 x 40 000 = R16 billion.

2.2 Supplementary staff at all schools. All schools are to have two physical education teachers, two social workers, one nurse, one orthodontist and six art teachers. 12 x R400 000 x 23 000 schools = R110 billion.

2.3 All students are to receive two warm meals per day. 13,6 million students x R20 (one additional meal) x 200 days = R54,4 billion.

2.4 All matriculants are to attend a tertiary institution. Cost incalculable.

2.5 10 000 students annually are to be given bursaries to attend “the best universities in the world”. Cost of a three-year degree at an overseas university: R3 million x 10 000 = R30 billion.

2.6 Research funding is to be tripled. The state spends about R40 billion on research; add twice that: additional cost = R80 billion.

2.7 100 000 additional police are to be employed. 100 000 x R400 000 = R40 billion.

2.8 7 000 new police vehicles are to be bought. 7 000 x R300 000 = R2,1 billion.

2.9 “Double social grants.” Another R300 billion.

2.10 20 000 “new people” in cybersecurity. 20 000 x R400 000 = R8 billion.

2.11 Employ 10 000 artisans for water issues. 10 000 x R400 000 = R4 billion.

2.12 Employ 100 000 environmental scientists. 100 000 x R400 000 = R40 billion.

2.13 Annual support for projects of the African Union. For example, building fast rail facilities joining all African capitals. R187 billion (this figure is in the EFF document).

2.14 Add the operational costs of the proposed satellite police stations, libraries, markets, multipurpose centres, clinics, hospitals, astronomical observatories, harbours, teachers’ training colleges, nurses’ colleges, satellite universities, five state banks and nine state-owned companies. Incalculable, but a guess is R50 billion.

Total annual recurring costs of this sample of the EFF package = about R920 billion.

Total annual recurring costs, plus a third of the once-off costs = R1 420 billion per annum. This is the approximate additional cost to the state of a sample of the demands of the EFF manifesto. The full story is much bigger, incalculably bigger.

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This is the manifesto from hell.
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This figure, R1 420 billion, is almost exactly equal to the total tax revenue of the South African state in a tax year now. Thus the EFF spending proposals can only be afforded by doubling the existing tax income.

Where will this money come from?

Where will this money come from? The state is dominantly funded by two main sources – taxation and borrowing – with a small package of international grants also being in the mix.

What does the EFF manifesto say of taxation?

There are four main sources of taxation revenue – VAT, PAYE, levies on petroleum products, and corporate tax.

  • The EFF manifesto says that it will drop VAT to 14% – so, no additional revenue here.
  • It says nothing of PAYE rates – presumably they are unaltered. Nothing here either, then.
  • And it appears to be silent on the fuel levy. So, no change there.
  • It proposes to raise corporate taxation from 28% to 32%. This will hardly offset the money forgone in the VAT reduction.

Thus, in the business of the four main sources of taxation, the EFF proposals do not in any meaningful way increase the state’s coffers.

So, it must be borrowing that the EFF anticipates will fill the gaping hole between their spending proposals and their anticipated tax revenues. No, it’s not that either, for they are determined to reduce state debt to 20% of GDP – it is now between 50% and 60%. So, borrowing must be repaid rather than increased.

How, then, will state revenue rise to meet this tsunami of spending?

Here, the EFF have a one-line answer: they are targeting a 100% increase in annual tax collection (presumably at SARS). And if there are to be tax increases, they will be on illegal financial flows, on capital gains and as a wealth tax. How these will increase the existing take on these (small) tax sources, to double the size of the nation’s tax take, we are not told.

Phew – as we all know, we have one world-class government department in South Africa, and that is SARS, reconstituted after getting JZ’s hands off its throat. How on earth can it be expected to double tax collection without raising tax rates?

It’s fiction, this manifesto, pure fiction. A wild, mad wish list, uncosted, nowhere nearly in touch with the realities of the South African fiscus. Every possible improvement in services, but at no cost. An impossible world.

Worse to come

But, Gentle Reader, there is worse to come.

For, in the introduction to this manifesto (by the EFF president, Julius Malema), we are reminded that the EFF is committed to seven pillars, two of which are:

  • “The expropriation of South Africa’s land without compensation for equal distribution in use”, and
  • “The nationalisation of the mines, banks and other strategic sectors of the economy without compensation”.

For the sake of brevity, I will concentrate my remarks to the possible confiscation of the ownership of the banks. Similar issues follow, should attempts be made to expropriate the mines and the land.

The uncoordinated nature of this manifesto is evidenced in the proposal that, while at least six banks (see below) are to be brought into state ownership, another seven “state-owned banks” are to be created simultaneously (see above). Going a bit long on banks, is our Julius.

The top twelve listed (ie, are quoted shares on the Johannesburg Stock Exchange) financial institutions in South Africa are six banks (FNB, Standard, Capitec, Nedbank, ABSA and Discovery) and six insurance and investment companies (Sanlam, Old Mutual, RM Investments, 91 Group, Santam and Momentum). Between them, they have a market capitalisation (ie, the market value of the company calculated by multiplying the current share price by the number of shares in circulation) of about R1,5 trillion. The mining houses on the JSE have, in aggregate, a slightly lower market cap.

To confiscate these companies without compensation would be to revalue their market cap at zero – for their shares are now proven to be of no value. This would downgrade the asset base – and thus the wealth – of the retirement funds, the companies and the individuals that hold these shares, by this amount. And it would prevent these companies from augmenting their cash base by selling new shares. This would also stop in their tracks, all mergers and acquisitions. And it would end foreign investment in South African companies at a stroke. And it would degrade, over a short time, the management of these institutions to Eskom/Transnet levels, for the management of these companies is internationally admired and is very mobile.

In a few words, the expropriation of the financial institutions, the mines and the land without compensation would stop the South African economy in its tracks, and make the Zimbabwean disaster look like a kiddies’ party. It would even make the spending overrun of the EFF manifesto look like an insignificant problem – which it certainly isn’t.

What does it mean?

Should a future government attempt to implement this manifesto, two things would happen simultaneously:

Firstly, government spending would immediately so outpace tax collection that no institution would buy government bonds. Thus government cash flow would quickly be so restricted that the government as we know it would stop in its tracks.

Secondly, the confiscation of the banks, the mines and land would immediately destroy the financial markets, the mining industry and the property industry – ie, it would stop South Africa’s economy in its tracks.

It would be a financial Armageddon.

This is the manifesto from hell.

See also:

Election 2024: The DA’s rescue plan for South Africa, a review

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

South Africa’s national election in 2024: exciting times ahead?

To the moon or a crash landing? 2024 election prospects

Staatsrede 2024

Die 2024-verkiesing: Is ’n Suid-Afrikaanse Lente op pad?

Verkiesing 2024: Wat soek kiesers?

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