South Africa

BUDGET 2022 ANALYSIS

Godongwana’s maiden Budget finds a soft landing despite political theatre and protest on different sides of the parliamentary fence

Godongwana’s maiden Budget finds a soft landing despite political theatre and protest on different sides of the parliamentary fence
Finance Minister Enoch Godongwana delivers Budget 2022 at the Good Hope Chamber on 23 February 2022 in Cape Town, South Africa. (Photo: Gallo Images / Jeffrey Abrahams)

Finance Minister Enoch Godongwana seems to have made the impossible possible – remarkably little disagreement emerged in the immediate aftermath of Wednesday’s Budget. At least not inside the parliamentary precinct.

It was against the backdrop of protesters’ “Amandla!” and Struggle songs that Finance Minister Enoch Godongwana did the traditional round of interviews with broadcasters, post-Budget.

The show must go on, as the saying goes, and Budget Day, like the State of the Nation Address (Sona), is part of the political theatre that marks key dates on South Africa’s political calendar. 

The protest of the South African Federation of Trade Unions (Saftu) and the EFF outside the main gate of Parliament highlighted education and health funding restrictions and the failure to announce a basic income grant (BIG) or income support for those aged 18 to 59.

It continued some time after the ministers, politicians and officials dispersed from the parliamentary precinct behind the black antique palisade fencing.

Earlier on in the precinct, the overall sentiment seemed to have been that the finance minister “did a good balancing job”, given that he didn’t have much to work with. 

And when political parties across the board, regardless of ideological leanings, agree with the governing ANC finance minister that South Africa’s debt and debt repayment costs remained the biggest worry, then Godongwana’s Budget hit the political bull’s-eye.   

Finance Minister Enoch Godongwana (left) with President Cyril Ramaphosa before delivering the 2022 Budget at the Good Hope Chamber on 23 February 2022 in Cape Town, South Africa. (Photo: EPA-EFE / ELMOND JIYANE / GCIS)

Members of the SAFTU and civil society protest outside Parliament where Finance Minister Enoch Godongwana was set to deliver the national Budget at the Good Hope Chamber on 23 February 2022 in Cape Town, South Africa. (Photo: Gallo Images / Jeffrey Abrahams)

 In his maiden Budget, Godongwana repeatedly underscored it was the additional R181.9-billion collected in taxes, mostly because of a commodities windfall, that had given the government the wiggle room to maintain social protection while doing the necessary to manage debt. It’s a split of 55% on urgent spending and 45% on debt. 

This additional national revenue helped bring down the Budget deficit to 5.7%, lower than anticipated some three months ago in the November Medium-Term Budget Policy Statement. Also coming in lower is the peak of 75.1% debt to gross domestic product, compared to the 88.9% forecast in the 2021 Budget. 

This additional revenue also funded the R5.2-billion tax relief for individuals, made available the R44-billion to pay for another 12 months of the monthly R350 Social Relief of Distress grant, and provided the R18.4-billion for the Presidential Employment Stimulus as part of the R76-billion job creation funding over the next three years. 

That is a good story to tell, that even in this difficult environment we have been able to do all these things,” Godongwana told journalists at the traditional pre-budget speech briefing. 

“The improved revenue performance is not a reflection of an improvement in the capacity of our economy. As such, we cannot plan permanent expenditure on the basis of short-term increases in commodity prices,” said Godongwana in the clearest indication a BIG is not on the cards, although a review of all social support measures is getting under way.

Picking up from President Cyril Ramaphosa’s Sona, which bluntly stated the private sector created jobs, not the government, Godongwana put numbers to small business support – R35-billion in both government-guaranteed loans and equity – and dropped the corporate tax rate by one percentage point to 27%. 

The additional tax billions were widely welcomed by opposition parties, but it was the no hike in the fuel levies that got the thumbs-up all around. This status quo will assist not only consumers but also business, according to sentiment across the political divide.

For most of the opposition in Parliament, the Budget niggle was South Africa’s debt – and the average R330-billion annual repayment costs over the next three years.

It’s a point that ideological opponents like the EFF, DA and the Freedom Front Plus agreed on.

FF+ leader Pieter Groenewald said these numbers meant South Africa effectively paid R90-million a day to service debt costs. And also “deeply worrying” was that 46% of South Africans depended on one grant or another. 

“Why do you keep accumulating debt when you are unable to deliver services?” was how EFF Chief Whip Floyd Shivambu put it.

While welcoming what he called a cautious Budget, DA MP and finance spokesperson Dion George expressed concern at the “rosy picture of the government’s debt consolidation measures”.

Members of the EFF protest outside Parliament before the national Budget at the Good Hope Chamber on 23 February 2022 in Cape Town, South Africa. (Photo: Gallo Images / Jeffrey Abrahams)

Finance Minister Enoch Godongwana (left) and President Cyril Ramaphosa leave together after the national Budget at the Good Hope Chamber on 23 February 2022 in Cape Town, South Africa. (Photo: Gallo Images / Jeffrey Abrahams)

The national debt is set to be confirmed at R4.35-trillion for the 2021/22 financial year and to rise to R5.4-trillion in 2022.

This is enough to set alarm bells ringing but government continues to exhibit a lack of urgency, instead choosing to kick the debt can down the road. The minister has not been bold in addressing non-priority spending within the state, a key requirement if we are to begin addressing the national debt crisis.”

IFP MP Inkosi Mzamo Buthelezi agreed, adding in a statement that there was a risk that plans would not come to fruition, “if those who continue to steal from the state are not held accountable…”

However, the IFP welcomed the greater allocations to local government, given municipalities’ service delivery mandate, as Good MP Brett Herron said it was a Budget South Africans could be encouraged by.

Business Leadership South Africa CEO Busi Mavuso shared concern over the debt levels but welcomed the Budget measures as a step in the right direction.

“While the country is far from being out of the woods, our finances have improved from the worst… There is still much work to be done to restore our fiscal position to enable the kind of investment and social spending that would provide a better life for all South Africans.”

The South African Sugar Association was not happy with the increase of the health promotion levy by 2.31 cents per gram of sugar, an effective 4.5%. That went against the sugarcane value master plan to 2030 that was meant to determine a long-term policy and taxation framework, the association said in a statement. That work was still ongoing.

AgriSA welcomed the “prudent” Budget, despite its disappointment in the above-inflation excise taxes, which placed marginal jobs in greater jeopardy.

“The wine, tobacco and sugar industry have been amongst the most affected by challenges, including the Covid-19 restrictions and the unrest in July 2021,” it said.

Intellidex analyst Peter Attard Montalto described the Budget as “fine”, broadly speaking.

Stepping back though, this was a Budget that struggled to do the prioritisation of existing underlying spending – only with extra baubles on top from extra revenues,” he added. “The Budget system is still rather broken overall on a political level then, even if National Treasury is holding the line on consolidation for now.”

The governing ANC understandably congratulated Godongwana – “a good balancing act” is how Parliament’s appropriation committee chairperson Sifiso Buthelezi described the Budget

In reference to both the fuel levy retention and the corporate tax rate drop, he added: “We want to see the private sector to come on board.”

Infrastructure spending, small business support and reducing debt were all part of the package for economic growth and job creation, Buthelezi added.

ANC alliance partner Cosatu expressed disappointment about “endless dithering, shifting deadlines” – and over the lack of new policy interventions, voicing concerns that a 1.8% growth rate average over three years did nothing for jobs, and over what it called continuing austerity.

“I do not see much that will get us out of this difficult position,” said Cosatu parliamentary liaison Matthew Parks. While it was disappointing the R350 monthly grant was not adjusted for inflation, he welcomed the improved revenue collection by the SA Revenue Service.

“They can get things done now again. Why can’t we have similar good leadership at state-owned entities [SOEs]?”

That SOEs debacle will unfold once details emerge not only of mergers, sell-offs and restructuring, but also the new governance and remuneration policies. Both Ramaphosa and Godongwana talked of this not even two weeks apart.

When Ramaphosa replied to the often acrimonious two-day Sona debate, he pushed hope and resilience.

“Let us be the merchants of hope. Let us be the merchants of confidence. Let us go out there and spread hope and confidence amongst our people instead of cynicism,” he added, going off script. 

On Wednesday Godongwana picked up the messaging. “We have got hope,” the finance minister told journalists. “We are turning the tide. We have the capability to change things around.”

The protesters at the gate of Parliament would not necessarily agree with that. But having pushed hope, the pressure to deliver is even greater. DM 

 

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