Can Tito Mboweni’s emergency Budget cut through powerful special interests and serve the public good?
Lobbies for taxis, nuclear power, state unions, SAA and preferential procurement weigh heavily on Finance Minister Tito Mboweni’s indebted state.
Ahead of the tabling of an adjusted national Budget on Wednesday 24 June, powerful figures in the taxi industry, SAA and trade unions, as well as preferential procurement gurus, are lobbying for their slice from Finance Minister Tito Mboweni.
The power of these lobbies means that the public interest is unlikely to be served as Mboweni tries to fend off a debt crisis which could see the debt to GDP levels exceed 100% over the medium term, as Mboweni himself revealed on social media at the weekend.
Taxis are on strike in the economic heartland of Gauteng, amid demands from the 250,000-strong industry for a government bailout. The severity of a taxi strike in SA is akin to lockdown Level 6. The R50-billion industry is the spine of public transport in South Africa and taxi bosses have the power to cripple an already limping economy.
Last week, Transport Minister Fikile Mbalula offered a R1-billion-plus bailout to the taxi industry, which has taken a beating like all others. This amount was rejected as too little. Taxi bosses want a far larger payout of R20,000 per taxi, and it’s likely that Mboweni will factor that in as he contemplates this emergency adjustment Budget.
In his 77-page economic reform document published in August 2019, Mboweni said that bailouts for failing state-owned enterprises had to stop, yet his comrades in the ANC have determined that a national carrier, SAA, is vital for the country’s sense of itself.
Going by the latest numbers, he now has to find R26-billion over the medium term to bail out SAA. Powerful aviation trade unions are pushing back against a trimmed workforce (down from just over 4,000 positions to 1,000 in a national airline reimagined by the business rescue practitioners), so the cost could, in fact, go up if that special interest succeeds, as it is likely to.
At the weekend, trade unions, which organise around 1.3 million government employees, warned Mboweni against trying to reduce the negotiated wage increase in an effort to save R37-billion in this financial year.
The state is virtually bankrupt but government employees are holding Mboweni to inflation-busting increases. This is while most private sector workers (who fund the state wage bill through taxes) have suffered job cuts and pay freezes. The revenue take is likely to be billions of rands under target, but the unions want their increase. And they are likely to get it, being the most powerful special interest group in the country, along with taxi drivers.
Mboweni has estimated savings of R160.2-billion on the state wage bill over the three years of the medium-term expenditure framework, but without political back-up (which he does not have), this saving is in the balance.
There’s another special interest group also looking to be cut in at considerable cost to the state – the proponents of enhanced preferential public procurement. A new procurement bill is currently before parliament, and a powerful lobby wants higher preferential rates for black business as a way of restructuring the economy. But, in a debt trap, this lobby becomes an expensive special interest ill-affordable in a crisis. In a nutshell, this policy means that black business can charge the state more to buy its products and services than it would cost the government to buy on the open market. It’s a lever used in many countries to restructure ownership, but in a post-Covid economy, is it affordable?
There are other special interests knocking at the public finance door: while Mboweni’s 2019 growth paper clearly favoured renewable energy and own-generation for big industries as a way to shore up the power grid, that remains a distant dream. Instead, the far more senior political leader, Mineral Resources and Energy Minister Gwede Mantashe, is pushing an expensive nuclear option that will cost the fiscus dearly.
It’s likely that Mboweni would want to stand firm in the face of special interests so that the greater public good is served, but he is unlikely to be able to do so. This casts a pall over his future as finance minister and over South Africa’s ability to evade a debilitating debt trap that will encumber future generations. DM