SA just holding on: The mid-year budget that treads water

Government still clings to plans rather than action, desperately moving money around without making the real changes needed

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12/11/2021 07:36:55

SA just holding on: The mid-year budget that treads water

MTBPS 2021 shows South Africa what we’ve known for a long time: our backs are against the wall as we grapple with the outcome of state capture, a stagnant economy exacerbated by the ongoing pandemic, a government unable to slash unnecessary spending and our inability to root out corruption.

Unsurprisingly, Finance Minister Enoch Godongwana’s first budget speech didn’t rock the boat, signaling that key fiscal goals remain the same, and unfortunately, we still hear talk of plans and hopes rather than action and implementation. The Minister tells us “reforms should focus on improving competitiveness, productivity, investment and employment”. These are worthy goals, but rather hollow when faced with examples such as the ongoing protection from competition for the failed SAA and other SOEs that operate in the competitive business space and have benefitted from government bailouts.

There was little to show investors that South Africa is open for business, other than a spark of hope with the Minister backing the President by calling for an accelerated transition to renewable energy – a long overdue decision to mitigate constraints due to our energy crisis.

The local government disaster is a prime example of the promises vs action problem.

Minister Godongwana tells us that “Our immediate task is to build capable local government that delivers services effectively and efficiently,” as though this is a new problem, speaking of “pilot sites for innovation and experimentation”. This is not necessary as this work has already been done in municipalities that already function well above the norm. All government needs to do is look to those few towns and cities that have got it right, and benchmark to their standards whilst learning from them how to fix and run our towns and cities. Unfortunately, this is a classic example of how politics gets in the way, it becomes embarrassing to the ruling party to have to cite the successes in this space belonging to their opposition.

What we do worry about is that the MTBPS also notes about the local government fix: “These programmes cannot create an internal culture of accountability and commitment: that is the responsibility of political and administrative leaders in local government.” Yet the Minister doesn’t emphasise how the Treasury will enforce oversight and penalties in those municipalities who don’t get their financial management house in order. We hope that the promised zero-based budgeting will eventually extend to local government, although we are concerned about those implicated in looting and mismanagement being involved in this process.

The failure to address that culture of accountability and commitment is at the heart of most of South Africa’s problems and, again, gets lip service in this budget.

On the face of it, there was a little false comfort from the Minister on bailouts. “In this MTBPS, no additional funding is provided for state-owned companies.” However, the Minister says that the exceptions are “where guarantees have been called by creditors and conditions have been met by the SOC in question, within the context of their strategic importance”. What we needed to hear was more concise input on the policy of dealing with and closure of failed SOEs. 

Once again, the future of e-tolls is dodged although the MTBPS is the main budget policy document, but it quietly acknowledges that e-tolls are a failure by shifting R3.740 billion with the Transport vote from non-toll roads to the Gauteng Freeway Improvement Project. Treasury has been funding the e-toll shortfalls for seven years now but the gantries continue to charge motorists in this failed “user-pays” scheme.

The big spend is on the unbudgeted part of the public service wage increase, much of which goes to the provinces. However, another ominous mention is that this R20.5bn a year in operational costs might next year have to be taken from the Infrastructure Fund. It is essential to curb the wage bill.

The poor (currently about half the working-age population and their dependents) face an anxious wait for February to hear whether the R350-a-month Social Relief of Distress Grant will last a little longer or be replaced by something more long-term. But in the face of such crisis, there seems little hope for them. Years of misspending has resulted in debt-servicing costs that continue to crowd out essential services.

Whilst the target to eliminate the budget deficit by 2025/26 is a valiant one, there is little to no indication of how this will be done without more revenue. Many failed entities, programmes and projects must be cut, but who will do the pruning? Budget 2022 must see major trade-offs.

More information

A soundclip with comment from OUTA CEO Wayne Duvenage is here.

Picture: OUTA