A fortnight ago, President Cyril Ramaphosa took centre stage with his State of the Nation address (Sona). On Wednesday afternoon it is the turn of Finance Minister Enoch Godongwana when he presents the 2024 National Budget to Parliament – perhaps the most important one in his political career, coinciding with the 30th anniversary of the country’s nascent democracy.
Never mind the rhetoric of disappointment, disillusionment and despair of huge swathes of his compatriots, and the seamless never-ending vitriol of a disparate and fragmented opposition and media.
I wonder whether when Godongwana became finance minister in August 2021, he envisaged that his job was beyond the task of merely balancing the national Budget, to that of permanent crisis management as it has been for his predecessors since after Madiba’s presidency.
Balancing budgets per se is an overrated over simplistic post-Bretton Woods dispensation borne largely out of the neo-liberal consensus, with its obsession with the role and size of the state and low taxes, which combines a curious mix of sometimes competing market principles at any cost, especially to the detriment of the disadvantaged, often skewed heavily against the aspirations and post-colonial development agendas of emerging and developing economies.
To his credit, Godongwana is a pragmatist, respected in the financial markets, albeit he is beholden to the vagaries of the competing and latterly self-serving and corrupt factions and back story demands of the ruling ANC’s historical and current narrative.
Just as well he has steered away from sentiments such as: “Crisis? What crisis?” The last time a democratic politician uttered the three words, it helped bring down a British Labour government in 1979.
Far from being a snake oil salesman, he is a pedlar of hope predicated by an endless diet of the rhetoric of aspiration. The problem is that the ANC’s scorecard in transforming hope into prosperity and well-being, and aspiration into reality since 2010 has been pretty dismal.
No wonder there is the dichotomy of a national mood of resignation that not much will be different in the Budget which would positively transform their cost-of-living expectations on the one hand, and an air of anticipation that perhaps voters are at a tipping point and it is time to give the party a bloody nose by denying it an absolute majority for the first time since democratic politics in 1994.
We can speculate till the cows come home about the substance and form of Budget 2024. The main takeaways of Ramaphosa’s Sona were predictable fighting crime and corruption; unemployment; eliminating load shedding and promoting renewable energy; the National Health Insurance Bill; and the extension of social relief of distress (SRD) and welfare handouts to a wider cohort universe.
But what will be Godongwana’s give-aways in his Budget 2024? He is caught between the rock of the dire state of the economy and a hard place of an over-exhausted and shrinking fiscal space and pandering to the atavistic pastime of handing out electoral bribes – with a general election looming in May 2024. It would only be human for the minister, especially in contemporary democratic polity, to heed the clarion calls for higher state pensions, social security and welfare payments, child credits, unemployment and other social safety nets.
There is little headroom for big tax rises, perhaps tinkering at the edges of slight increases in VAT, the fall to tax to raise revenue quickly. It would be political suicide to raise income and corporation tax especially as individuals and companies, including SMEs, are struggling with cost-of-living and cost-of-business issues. South Africans continue to be clobbered through a spate of indirect and hidden taxes such as rising food, fuel and household goods prices.
No amount of soliciting Budget tips from the public, nor Tintswaloesque metaphors about the resilience and development journey of individual compatriots, as commendable as that may be, can hide the real economy and lived experience demands of a hapless and suffering populace, most of whom still await the holy grail of true post-apartheid economic freedom, nay liberation.
Godongwana has given some hints about his Budget priorities but they are mostly catch-all. “Over the medium term,” he said in response to Fitch Rating’s affirmation of South Africa’s long-term foreign and local currency debt ratings at “BB-” with a stable outlook in January 2024, “government will focus on raising GDP (gross domestic product) growth by improving the provision of electricity, logistics and enhancing the delivery of infrastructure.
Fiscal policy continues to support this approach by stabilising debt and debt-service costs. Government reiterates that fiscal consolidation will be implemented through spending reductions, efficiency measures across government and moderate tax revenue measures.”
Credit fundamentals are a useful yardstick to gauge Godongwana’s pending Budget metrics, because they dictate the eventual cost of borrowing, debt servicing, insurance premiums for investment, especially in infrastructure projects. As Fitch maintains, the South African economy is constrained by a string of macro-economic metrics of shame – historically subdued low real GDP growth, a high level of inequality, a high and rising government debt-to-GDP ratio and a modest path of fiscal consolidation. Growth is hampered by power shortages that are expected to continue in the near to medium term, although at a lower magnitude than in recent months, and by a struggling logistics sector.
The updated January 2024 IMF World Economic Outlook estimates South Africa’s real GDP growth at 0.6% in 2023, projected to rise to 1.0% in 2024 and 1.3% in 2025, which confirms the near-term subdued outlook for growth and the fact that it is too low to help pay towards any election handouts and recovery. To contain debt accumulation, Godongwana plans “to present a new fiscal anchor in the FY24 fiscal bill in February 2024”.
Fitch expects general government debt to reach 83.2% of GDP in FY25, from an estimated 76% in FY23.
South Africa is faced with a cornucopia of economic and societal crisis, against a background of falling ANC popularity and support. This is the realpolitik context of Godongwana’s pre-election Budget.
We wait to see how his Budget mitigates or contains the metrics of shame, and whether he can rise above the ideological straitjacket of his ANC cadres and come up with an urgent and meaningful action plan to counter entrenched corruption which can be independently measured; co-opt greater and urgent participation of the private sector, including the pension funds, banks, insurance firms and asset managers, in key sectors such as renewable energy and infrastructure, but on equitable terms to the taxpayer, investor and other stakeholders.
For Godongwana it could be a choice of “Budget and be Damned”.
Madiba famously said: “The greatest glory in living, lies not in never falling, but in rising every time we fall.” South Africa’s socio-economic decline has been so entrenched for almost 14 years that it has assumed a resilience of its own. Lest “falling” replaces rugby as the national sport, how indeed do we, as South Africans, deal with the osteoporosis of the South African psyche and condition?
* Parker is an economist in London
Cape Times