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MTBPS ANALYSIS

No good budgetary choices in troubled times ahead of a crucial 2024 election

No good budgetary choices in troubled times ahead of a crucial 2024 election
Minister of Finance Enoch Godongwana. (Photos: Gallo Images / Jeffrey Abrahams / Brenton Geach)

Having assured the governing ANC’s national executive committee that South Africa was not running out of money – and that fiscal discipline wasn’t austerity – Finance Minister Enoch Godongwana must try to persuade everyone he’s got the answers in Wednesday’s Medium Term Budget Policy Statement.

The fact that economic growth prospects were revised slightly up to 0.7% from 0.4% in September by the SA Reserve Bank is cold comfort to consumers struggling with stubborn above-inflation food price hikes, rotational power cuts and a series of petrol price increases that have raised transport costs.

Resilience is much talked about, but battling high costs and unemployment takes a heavy toll on workers, jobseekers and businesses – actually, almost everyone living everywhere from metros to rural dorpies and villages is being hammered by the cost of living crisis.

To say Finance Minister Enoch Godongwana is saddled with a balancing act with many moving parts is an understatement. In the run-up to an election in 2024, it would be easy to spend, spend, spend – that has happened before – but this time, the rands and cents are simply not there.

While tax collection continues to sharpen, South African Revenue Service Commissioner Edward Kieswetter recently told MPs that the domestic economy lost anywhere between R60-billion and R150-billion because of Eskom’s rolling blackouts. That’s a significant loss in tax revenue.

The pressure is also on because of spiralling interest payments – it’s the fastest-rising Budget item in at least three years, and second in quantum only to social spending.

Read more in Daily Maverick: Godongwana’s Medium-Term Budget Policy Statement likely to present a gloomy fiscal outlook

But a political home truth is that the ANC has garnered significant public cred on the back of extensions to the social grant network. Fear that grants would be cancelled emerged as a central reason for voting for the ANC, rather than another political party, it emerged in 2019 research by the University of Johannesburg.

The Covid-era’s monthly R350 social relief of distress grant continues to be paid to eight million South Africans, even though new rules shed several million recipients post-pandemic lockdowns. It’s not something to be tampered with. This week’s Medium Term Budget Policy Statement (MTBPS) is set to signal another extension to the grant to be announced in the February 2024 Budget.

At the so-called Spier meeting in September, when National Treasury briefed President Cyril Ramaphosa, such an extension was on the table with one proviso – a full-scale, proper policy review to ensure an improved social network.

That the ANC national executive committee has, for a couple of years already, spoken of the need for a basic income grant, while the ANC in government has not moved on the issue, perhaps indicates the underlying fundamental shortcomings of the state – proactive, agile and, above all, speedy policy and governance responsiveness.

But that’s another matter, and one beyond Wednesday’s MTBPS.

‘Cash injections’ 

More pressing are the continual state-owned enterprise (SOE) bailouts – or cash injections, as the preferred government jargon goes. 

Troubled and indebted state logistics provider Transnet apparently put in a bid for a R100-billion bailout. Like Eskom, which got R254-billion in February’s Budget, Transnet has government by the short and curlies. After all, when chasing economic growth, logistics and power are not negotiable.

Other SOEs hoping to dip into the public purse – either at the MTBPS or with a promise for the February 2024 Budget – include national carrier SAA, the SA Post Office, the SABC, the SA National Roads Agency and possibly Denel.

The money must be found somewhere.

In the past couple of budgets, National Treasury has acknowledged that South African workers are taxed out. Raising value-added tax is politically unpalatable, and even more so before an election year. A VAT hike hits everyone, especially the poor and most vulnerable. 

The MTBPS will signal any possible tax changes to be announced in the next Budget. 

Cost containment 

National Treasury’s August pink slips – the cost containment letters – instructed that every cent not locked into some function must be saved. But it’s unclear how much can actually be added up after several years, now that catering, travel, accommodation and possibly even consultant costs have been cut.

Hence the proposal to cut programmes. The Expanded Public Works Programme might be one; the National Prosecuting Agency’s aspirant young prosecutors project could be another.

Coincidentally, the Spier presentation signals that cost-cutting is central to the reconfiguration of the state that Ramaphosa, in his 2023 State of the Nation Address, said the Presidency and National Treasury were working on.

But reconfiguring the government for cost containment is short-sighted expediency. It fails to ensure the required macro reforms for the administration to perform proactively, flexibly and responsively so that service implementation becomes more than just another ministerial or presidential project launch PR moment.

Again, perhaps not for the MTBPS, but something to keep in mind in the days and weeks to come.

The public outcry over proposed spending cuts, or austerity measures – depending on ideological outlook – cannot be ignored. The protests talk to the possibility of doing things differently than perpetual cutbacks.

But the reality is that everyone is distracted by everything from global geopolitical ructions and wars to the noise of the 2024 election campaign that is effectively already under way. DM

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