South Africa

MEDIUM-TERM BUDGET POLICY STATEMENT ANALYSIS

Muted responses to reality-check MTBPS as SA’s debt debacle impacts economic growth

Muted responses to reality-check MTBPS as SA’s debt debacle impacts economic growth
Finance Minister Enoch Godongwana addresses the media before delivering the Medium-Term Budget Policy Statement on 1 November 2023. (Photo: Shelley Christians)

Debt and rising debt repayment costs, now the biggest government expenditure, was the thread in Wednesday’s Medium-Term Budget Policy Statement. It means everything from no bailouts for state-owned entities to rejigging departmental spending and more taxes.

‘I have a new name now – Mr Austerity,” quipped Finance Minister Enoch Godongwana in the lock-up briefing to journalists before he delivered the Medium-Term Budget Policy Statement (MTBPS) on Wednesday.

It hinted at the criticism he and National Treasury faced from labour – the ANC’s partner is trade union federation Cosatu, which organises the majority of public servants – and from civil society. 

The criticism sharpened in September when the so-called Spier meeting with President Cyril Ramaphosa on cutting costs, programmes and projects – alongside reorganising the state – became public knowledge. 

Wednesday’s MTBPS extended the R350 social relief of distress grant for a year to March 2025 and, despite expenditure cuts totalling some R21-billion, found an overall R10.3-billion of additional spending by rejigging roll-overs and shifting unspent money.

Read more in Daily Maverick: More tax to come, but no SOE bailouts, as Godongwana juggles public finances to extend R350 grant 

The message on maintaining social protection was driven home – 61% of non-interest spending is going to the social wage that includes health, education, housing and grants. With an election in 2024, it’s important.

But the core takeaway from the 2023 MTBPS is the threat of debt – it’s the fastest rising public finance expenditure, and risks crowding out social spending if not reined in. Or, as Deputy Finance Minister David Masondo put it in the pre-MTBPS briefing, “The social wage is not sustainable if the economy is not growing.”

This financial year, debt repayments are R14.1-billion more than the February Budget estimated, rising to R354.5-billion. 

In the 2024/25 financial year, R385.9-billion is set to be spent on debt servicing, rising to R455.9-billion in 2026/27.

Alongside falling revenue collection – R56.8-billion – as the mining commodity boom has effectively ended, these numbers mean the purse strings are not going to be loosened for more bailouts for ailing state-owned entities (SOEs). Not now, and, as National Treasury Director-General Duncan Pieterse said during the pre-MTBPS media briefing, not over the next three years.

But if there were to be bailout monies for, for example, state logistics provider Transnet, it would be on strict conditions as happened with state power utility Eskom when it got R254-billion in February under the Eskom Debt Relief Act. 

Proposed amendments will introduce interest payments on those monies and entrench ministerial powers to not pay out the next tranche.

On Transnet, Godongwana told journalists in the pre-MTBPS briefing, “We are not going to give any bailout, cash or guarantee until such time we have an interrogation with Transnet (and) we are satisfied the logistics roadmap is internalised.”

Three months have been set aside for that process – directly linked to previous bailouts to SOEs that did not deliver and were followed by further bailouts.

Read more in Daily Maverick: Transnet’s turnaround plan is premised on securing a R100bn ‘capital injection’ from government

The focus on economic growth reforms in electricity and logistics is central to what the MTBPS styled as “a careful balance between growth-enhancing agenda and stabilising the public finances”. 

With an emphasis on continuity, this is condensed into the motto: “Staying the course for growth and sound public finances.”

Sars Commissioner Edward Kieswetter (left) and Minister of Finance Enoch Godongwana walk to Cape Town City Hall before the delivery of the Medium-Term Budget Policy Statement on 1 November 2023. (Photo: Shelley Christians)

Widespread criticism

Few, if any, were convinced, aside from the governing ANC Secretary-General Fikile Mbalula.

“With all the challenges we are facing, we think it strikes the right balance,” he told the SABC, highlighting a mix of the R350 monthly grant continuation, the infrastructure focus and protecting education and health spend.

But ANC alliance partner Cosatu was unhappy.

Instead of a bold MTBPS to turn around a “tepid economy”, it said Godongwana “chose to deliver an underwhelming accounting note with reckless cuts to budget allocations and below inflation increases to departments pencilled in over the next three years”.

Solving the Transnet crisis meant retaining jobs, particularly in mining.

“Cutting medication to a patient in the ICU at a hospital will achieve little besides killing the patient. Workers can no longer afford to live on hope and prayers, whilst Treasury experiments with failed economic theories…” said Cosatu in a statement. 

DA MP and finance spokesperson Dion George welcomed Godongwana’s announcement of “new measures” for improved infrastructure public-private partnerships set for the 2024 Budget. But that was it.

“This MTBPS speech does not offer bold action and fails to address the urgent economic crisis facing South Africa,” said George in a statement, saying announcements on increasing zero-rated goods and cutting fuel levies could have been made.

“This MTBPS was confirmation that government simply does not care about the plight of battling South African households who are unable to put enough food on their tables. There was no mention of the so-called food security plan of action to protect consumers from the burden of skyrocketing food prices…”

Other opposition parties expressed concerns about the potential impacts of South Africa’s deepening debt. 

Freedom Front Plus MP and finance spokesperson Wouter Wessels said some of the expenditure cuts are inexplicable, such as taking almost R1-billion from water and sanitation at a time when South Africa struggles with dilapidated infrastructure.

“Clearly, South Africa is in trouble… The minister once again did not announce actual plans to address the Budget deficit and the unsustainable position with regard to government debt.”

IFP MP Mzamo Buthelezi said the party was “deeply concerned about the state of our nation and the continued mismanagement of our economy” by the governing ANC. The MTBPS that highlighted the impact of escalating debt was not something to celebrate.

“The future of our beloved country is looking bleak, with an economic outlook that offers little hope,” said Buthelezi in a statement.

United Democratic Movement Chief Whip Nqabayomzi Kwankwa spoke bluntly in a televised interview shortly after the MTBPS, pointing the finger at an ANC that couldn’t manage the country’s finances.

ActionSA said in a statement that the ANC government had run out of ideas. 

“The minister failed to address the government’s key impediment to economic growth – the mismanagement of public money and the looting of public coffers…”

The SA Revenue Service (Sars) put a positive spin on the MTBPS even as tax revenue was down by just short of R57-billion.

“Through focused commitment, Sars has paid back to the economy – through refunds for the first six months of the current fiscal year – an amount totalling R212.2-billion, higher by R24.6-billion over the prior year and higher than the Budget 2023 estimate by R30.1-billion,” Sars said in a statement.

Godongwana’s MTBPS had no fancy analogies involving the jaws of the hippo, the resilience of the aloe or anything like that. It was a blunt statement pointing to debt threatening to crowd out social and investment spending on infrastructure, among others.

As far as any sentimentality crept in, Godongwana thanked the Springboks, “for reminding us that with preparation, commitment, unity and resilience, you can conquer any adversity”. DM

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