Delivering his debut medium-term budget policy statement (MTBPS) in parliament, Gigaba, as expected, reiterated the government’s commitment to the fiscal consolidation path.
He called for a frank acknowledgement of the problems facing the economy amid the increasing difficulties in attaining targets set in the National Development Plan.
“It is only when we understand these challenges fully and candidly that we will know what to do and can decide what course we must take in addressing them, as well as what trade-offs we must make in the national interest,” Gigaba told parliament.
“The period ahead is not going to be an easy one. Our resolve is to remain on course and not to deviate irretrievably from the fiscal consolidation agenda we embarked on a few years ago. We will continue to optimise, squeeze and innovate to improve the quality and efficiency of our spending.”
Gigaba said improving the country’s economic growth outlook was the government’s biggest challenge. Addressing journalists before his speech, Gigaba said this year’s MTBPS “puts facts as they are”.
The government had had to make difficult decisions in order to maintain the fiscal framework and to ensure that the expenditure framework was not breached.
Gigaba also strongly advocated inclusive growth and transformation.
Gigaba’s assertions were consistent with those of former finance minister Pravin Gordhan, who, in his last budget speech in February, also advocated accelerating the pace of economic transformation.
“Our starting point therefore is that economic growth and transformation are mutually reinforcing principles. We cannot allow a repeat of the past where periods of relatively high economic growth were characterised by an uneven accrual of economic benefits. The economic exclusion of a vast section of the population undermines the realisation of the constitutional vision of a more equal society,” said Gigaba. Direct black ownership and management of the economy remains low. He was also critical of employment equity, saying progress for black people and women participating at top and senior management levels had “apparently” stalled.
“These distortions in the economy are unsustainable. They aggravate social fragmentation and pose a real risk to inclusive economic growth. The inequality they spawn can generate extremely divergent views, which make compromises difficult.
“The resulting stalemate and policy uncertainty can contribute to economic weakness and low confidence. As a result, South Africans (and citizens across the world) are rightly calling for a change in how the benefits of growth are distributed,” he said.
Gigaba also tore into Eskom’s governance problems, describing them as of “major” concern to government. The power utility is embroiled in allegations of corruption and failure of governance. Hearings into the conduct of former interim chief executive Matshela Koko are set to resume next month. Eskom has also suspended chief financial officer Anoj Singh.
Gigaba said the failures of governance, leadership and financial management of Eskom exposed the government to enormous risk because of guarantees as well as the size of its capital expenditure programme. Gigaba said the appointment of a new board was “an absolute urgent necessity”.
He said a new board would be appointed before the end of next month.
“Working with the new board, we will ensure a credible executive management team is in place,” Gigaba said. “We will ensure its financial management complies with the Public Financial Management Act, and that irregular expenditure is accounted for.”
- BUSINESS REPORT ONLINE