Fears SAA will tap pro-poor projects

• Hunt for R10.5bn rescue money causes union jitters • Job-creation initiative vulnerable

As the Treasury scrambles to find R10.5bn to restart SAA, jitters are growing in trade union and political circles that the biggest cuts will be to pro-poor spending on public employment programmes and the passenger rail system.

The Treasury, which is guided by cabinet’s ministers’ committee on the budget, was already deep into work on the adjustment budget — to be tabled in a month’s time — when it received the instruction last week to prioritise the funding for SAA. Cabinet has agreed that the R10.5bn must be raised in “a fiscally neutral way” and cannot add to the overall debt burden.

Deep cuts have already been made to departmental budgets this year. In February, the Treasury cut R260bn from the baseline budgets of departments, of which R156bn was cut altogether from the spending envelope and another R111bn was reprioritised. In June, another R100bn was cut from departmental budgets and moved to areas to support the Covid-19 relief effort.

It was also noted that more cuts would be required in October ’ s adjustment budget, to which the hunt for the R10.5bn for SAA has now been added.

There is speculation that the Treasury has its eye on the R19.6bn line item in the supplementary budget, which was allocated for employment support as part of the R500bn Covid-19 support package.

The allocation is to fund a programme of mass public employment, which is under development by the presidency, to cushion the impact of the pandemic and lockdown on job losses. It is estimated that about 2-million people lost their jobs over the past six months.

The plan proposes the creation of 1-million job opportunities in three years.

But with the money not firmly attached to departmental budgets yet and the programme not yet in operation, the R19.6bn is in the firing line for reprioritisation.

A second area with a budget allocation that is vulnerable to reappropriation is the Passenger Rail Agency of SA (Prasa). In February, the agency – which owns and manages the urban rail system – had an accumulated capital budget of R12bn. In February, it lost R8.5bn of this to other departments. But train services are suspended on several major lines due to theft and vandalism and the neglect of infrastructure.

Cosatu, which supports the

additional funding for SAA, said it would reject any attempt to take money from Prasa to fund SAA. “We do want SAA to be funded but we don’t want the money to be taken out from a mode of transport that services the poor,” said spokesperson Sizwe Pamla.

Cosatu parliamentary officer Matthew Parks said the budget needs to be reprioritised, as was done in June. “We cannot afford to lose the aviation industry. It’s critical to rebuilding the tourism sector … But the money cannot be taken from the Public Employment Programme. That’s a no go. Nor can it be taken from Prasa,” he said.

At the time of the last government bailout to fund the business rescue of SAA, the Treasury promised funds for SAA would be raised in a “fiscally neutral” way. In answer to questions last week, the Treasury said the transfers to SAA had not been fiscally neutral after all as Treasury had not sold any assets.

The business rescue funding was made up of a R2bn cash injection, funded by the commercial banks, and a R3.5bn payment funded by the Development Bank of Southern Africa. Both amounts were repaid to the lenders by the end of August.

“The R2bn was not fiscal neutral. It was only the R3.5bn which is intended to be fiscal neutral. However, the sale of non-core assets has been delayed due to the pandemic,” said the Treasury. The outcome of any sales will be disclosed in the medium-term budget policy statement in October and in the 2021 Budget Review.