Reality bites in an ‘election mini-budget’ showing SA on the ropes

Lower growth, lower revenue, economic outlook revised downwards, damaged government institutions, governance problems, high unemployment, rampant corruption and wasteful expenditure – these are a few of the issues newly minted Finance Minister Tito Mboweni tried to address in his medium-term policy statement yesterday.

“Strip away Mboweni’s credible delivery and admirable intentions and you are left with the harsh statistics of a 4% budget deficit, reduced gross domestic product (GDP) projections, 59% debt-to-GDP, poor revenue collections and excessive public-sector wage settlements,” political analyst Daniel Silke wrote on Twitter yesterday.

“That’s the reality.”

Silke said the mini-budget delivered in sentiment, but remained constrained by the political realities of a looming election, ANC divisions, ideological confusion and governance and institutional decay.

“Still, hints of policy shifts will depend on internal ANC politics in 2019. Mboweni said South Africa faces ‘tough choices’ and there are ‘no holy cows’. If he is referring to the grip moribund and unworkable ideology has on policy-making, then he is taking the battle to inside the ANC in a desperate attempt to kickstart growth,” Silke noted.

Political analyst Ralph Matekga said the budget was very moderate, and that Mboweni was avoiding confronting issues, especially that of the public-service wage agreement which exceeded budgeted baselines by about R30.2 billion.

“I don’t see any commitment to do something specific about the wage bill in the short term, only that it would have to be dealt with in the medium term,” Mathekga said.

“There seems to be an idea in the speech that says you will see structures fail, over the medium term. This could mean five years, it does not commit to anything now.”

Mathekga said it was a “very soft budget”.

“It’s an election budget, let’s be honest. I don’t think risks are being taken, it’s very moderate, very conciliatory, there seems to be a belief that if you can get a few things right by doing a bit of management properly, however I think we need major changes, we need structural reform.”

On the plus side sanitary pads, bread flour and cake flour, used to make amagwinya (aka vetkoek), will be zero rated as from April, 2019.

But like everything else in Mboweni’s speech, it comes at a cost: an estimated R1.2 billion a year.

“As a country, we stand at a crossroads,” Mboweni said.

“We can choose a path of hope; or a path of despair. We can go directly to heaven, or as Dickens so politely puts it, we can go the other way.”

The medium-term expenditure framework (MTEF) committed R5.9 trillion over the next three years. Of this amount, R3.3 trillion or 56.2 per cent will be allocated to education, health, the provision of water and electricity services, and social grants.

“I think it’s very clear government’s financial position, which of course is our financial position, is extremely weak,” said financial analyst Chris Hart.

“It’s trying to put the best spin possible on something which has really gone south since the budget itself earlier this year reflected a difficult situation and things have turned out so far much worse than expected.”

Hart said it was clear government was not in a position to stimulate growth and was in fact a drag on growth.

State-owned entities also receive additional allocations, Mboweni noted.

“South African Airways will receive R5 billion through a special appropriation bill to settle debt redeeming between now and March 2019. This will help to prevent a call on the airline’s outstanding debt of R16.4 billion, which is guaranteed by government,” Mboweni said.

“In addition, R1.2 billion is allocated to South African Express Airways. The South African Post Office receives R2.9 billion to reduce debt levels. It is expected that new boards at state-owned companies will ensure higher standards of governance and more effective use of public money.”

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