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Borrowing from Peter to help pay Paul

Minister of Finance Tito Mboweni delivers the Budget Speech 2021 at the National Parliament of South Africa. Photograph : Phando Jikelo/African News Agency(ANA)

Minister of Finance Tito Mboweni delivers the Budget Speech 2021 at the National Parliament of South Africa. Photograph : Phando Jikelo/African News Agency(ANA)

Published Feb 25, 2021


Finance Minister Tito Mboweni may be eccentric, but the country’s would-be acclaimed chef does give it like it is.

He is not shy to explain the government’s purses in a way that triggers attention.

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And yesterday, he did just that, telling the nearly-deserted legislative seat of the government in Cape Town that the country’s finances had continued to deteriorate at an alarming rate and taxpayers would have to fund more of the government’s programmes. But, he said all was not lost. Quoting Archbishop Emeritus Desmond Tutu, Mboweni said: “Hope is being able to see that there is light despite all of the darkness.”

With the government’s deteriorating fiscal position, Peter had to give something for Paul to survive. And that is exactly what Mboweni did, he raised the personal income tax by 5 percent and gave social grants recipients a hike of between R10 and R30.

And there was also something for the government’s vaccination campaign. Mboweni said there would be R10 billion set aside for the programme for the next two years.

He said the contingency reserve would increase from R5bn to R12bn to allow for further purchases of vaccines and to cater for other emergencies.

And he had his eyes set on the usual suspects as regards to low-hanging fruit. Effective immediately, smokers will pay an extra R1.39 for a packet of 20 cigarettes, beer will cost an extra 14c, wine will between 26c and 86c more and the beautiful waters of Scottish descent, otherwise known as whisky, will increase a whopping R5.50.

Surely Mboweni has listened to his cabinet colleagues on alcohol.

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“It is clear that excessive alcohol consumption can lead to negative social and health outcomes,” Mboweni said. “Consumers do react to price increases, and higher prices should lead to lower consumption of alcohol products with positive spin-offs.”

The jury is still out on this assertion. But sometimes Peter has to give something for Paul to survive.

And this is where the social media cook specialises, giving with the right hand while taking away with the left.

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“These acts of human solidarity and sacrifice reflect a patriotic spirit that inspires us,” he said. “Often, we speak about how we must leave this Earth better than we found it for future generations.

“Today, I want to leave you hopeful and outline how we will leave this economy in better shape for those who come after us.”

For once Mboweni did away with his maverick self. He sported a new haircut, a blue suit with a red tie, while the minister left out his famous biblical quotes in his speech.

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But he was clear about navigating a tough Budget, with some analysts saying it was the toughest Budget in the history of democratic South Africa.

That it was tough has become somewhat of a cliché. But this was the first Budget in a world that has been hit by the Covid-19 pandemic.

Mboweni said the main Budget revenue was now projected to be R1.35 trillion, or 25.3 percent of the gross domestic product (GDP) in 2021/22, rising to R1.52trln in the outer year (2023/24) of the Medium-Term Expenditure Framework (MTEF).

Non-interest spending would remain steady at approximately R1.56trln over the next three years, but will decline from 29.2 percent in 2021/22 to 26.2 percent of GDP in 2023/24.

And the government had committed R10bn to fund the country’s vaccination programme.

“We increase the contingency reserve from R5 billion to R12 billion to make provision for the further purchase of vaccines and to cater for other emergencies,” he said.

Mboweni remained rooted to the podium as he went line by line through his 20-page speech.

From time to time he chuckled with a handful of MPs in the Chamber, while the majority of Parliamentarians were following proceedings virtually.

In line with Covid-19 health protocols, Parliament allowed only a few MPs in the House.

During the State of the Nation address two weeks ago, Parliament only allowed 50 people into the House, including 30 MPs, with the rest being guests and officials.

But Mboweni stuck to his speech and only diverted on one or two occasions when he emphasised the point that this was not an austerity Budget and that his counterpart at Public Service Minister and Administration Senzo Mchunu is talking to the unions on the new round of wage negotiations.

Before the Budget, the opposition parties and civil society were already calling for a bold Budget that would ignite growth and at the same time protect the poor.

Mboweni was traversing a tough situation with debt spiralling out of control, now to hit 88.9 percent in the next five years.

The Budget is under pressure from competing items in the government with debt service costs now the third-largest expenditure item in the Budget after education and social security.

Health is following close on the heels. But it reflects a fiscus under pressure.

Mboweni has continued to warn about reducing debt.

A few years ago he said a sustainable economy could not borrow all the time. A manageable debt must be below 30 percent of GDP. But the debt in South Africa is close to the 90 percent mark that the government hopes to avoid in the next five years.

All eyes of the people were on this Budget and wanted to see how Mboweni would navigate through the difficult economic climate with Covid-19 threatening to decimate the balance sheets of businesses.

Whether Mboweni struck the right chord with his Budget remains to be seen. But in the National Assembly chamber he sought to win the backing of parties present physically and following proceedings virtually.

“As we affirm our commitment to sustainable public finances and the supremacy of our Constitution, we must again become resolute in the mission to recover and shape our destiny,” he said.

Sechaba Nkosi is the Deputy Editor of the Business Report and Siyabonga Mkhwanazi is the Independent Media Western Cape regional political editor

*The views expressed here are not necessarily those of IOL or of title sites


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