Mboweni warns against using government employee pension savings

Finance Minister Tito Mboweni has cautioned against relying on government employee pension savings as the only source of funding to rescue Eskom.

Mboweni addressed the media in Parliament on Wednesday after he delivered his budget speech.

He says the money should rather come from the pension funds of all South Africans.

Mboweni says the Congress of South African Trade Unions’ (Cosatu) proposal to rescue Eskom using state pension funds is not a bad idea.

He says, “It’s not a bad idea actually but I think we must be very careful that we are not suggesting that only the public service workers pensions must be used to solve Eskom’s problems. If we are going the pension route, it must be also the trade union movement must be very careful that the proposal they must not be about public servants pensions but all pensions.”

In the video below, Zehuti Advisory’s Mandla Issacs analyses Finance Minister’s #Budget2020 allocation:

Eskom struggling to meet South Africa’s power demand

The Budget Speech also comes at a time when State Owned Enterprises are struggling to keep afloat.

Mboweni has acknowledged that electricity problems will hold back economic growth.

Eskom has announced that there is possibility of increased load shedding over the next 18 months.

Mboweni says government will do whatever it takes to deal with challenges facing the power utility.

R230 billion has been allocated over ten years for the restructuring of the electricity sector.

However, South African Institute of Race Relations Chief Economist Ian Cruickshanks has warned that dealing with problems facing Eskom will be expensive.

“The ideas sound plausible but to bring back one of the older power stations now, that has got to be refurbished. That is going to be an expensive operation. I think what they are simply saying is admitting that there were huge mistakes that have been made in the whole design, building and operation of Kusile and Medupi.”

The graphic below shows how the money will be allocated:

Budget Allocations #BudgetSpeech2020 #sabcnews pic.twitter.com/vTC5QasMxZ

— SABC News Online (@SABCNewsOnline) February 26, 2020

Extreme act of bad faith

Analysts predict a major upset at the next public sector wage negotiations following Mboweni‘s announcement of a R160.2 billion reduction in the wage bill of civil servants over the next three years.

Presenting his Budget Speech, Mboweni also announced that there won’t be any tax hikes in personal tax.

Trade Union body, Cosatu expressed shock at plans to reduce the wage bill for civil servants.

Cosatu’s Parliamentary coordinator, Matthew Parks says, “It is an extreme act of bad faith and poor negotiations by the government to indicate to us they want to withdraw from this year’s agreement. So as far as labour is concerned, we can’t withdraw from it. We’re willing to discuss next year and the following three year agreements. We’re willing to put a compromise on the table.”

In the video below, SABC Reporter, Bulelani Phillip reports that the minister made too many promises with regards to the wage bill.

Sin taxes

The fuel levy and sin taxes have been increased significantly. The fuel levy will go up by 25 cents while smokers and drinkers will also pay more.

A pack of 20 cigarettes will now cost an extra 74 cents while spirits go up by R2 and 89 cents.

Motorists will see an increase of 25 cents per litre in the fuel levy – which consists of 16 cents per litre in general fuel levy and 9 cents increase in the Road Accident Fund levy (RAF).

Consumers will pay more for sin tax. This consists of an increase in excise duties on alcohol and tobacco between 4.4% and 7.5%.