Cape Town - Economists, political analysts, politicians and civil society activists are divided over Finance Minister Tito Mboweni’s medium term budget policy statement (MTBPS) between those who share his vision of the “green shoots of a recovery” and those who don't.
In his statement Mboweni said: “The 2020 medium term budget policy statement charts a course that will enable South Africa to begin the difficult task of economic recovery.
“Government’s central policy goals over the next three years are to position the economy for faster, broad-based economic growth, and to return the public finances to a sustainable position. Achieving these objectives will require determined action,” said Mboweni.
“R10.5bn is allocated to SAA to implement its business rescue plan. This allocation is funded through reductions to the baselines of national departments, public entities and conditional grants.”
“Our approach is in line with the principle that funding to state-owned companies must come from within the current framework and reprioritised from elsewhere. We cannot break the fiscal framework.”
For most commentators the two most controversial points in the budget are the R10.5bn SAA bailout which will lead to further debt, and the further wage bill reductions and freezes that Mboweni announced.
Economist Mike Schussler said: “As a result of this budget our interest bill will be the highest it's been by far. By next year we will be paying more in interest than what we pay for basic education or health.”
“In three years time we’ll be paying more to service debts that we will be paying for schools and universities. Our debt service ratio will be growing at 16.1% in the next three years. This is scary and unsustainable and will end up taking more of our budget in the next few years. I really don’t think we’ll get out of this easily,” said Schussler.
Political economy analyst Daniel Silke said: “Since this country has technically run out of money, there were very few options left for Mboweni.”
“The reality is that something has to give. The question is to what degree Mboweni and President Ramaphosa sell this change to the public sector. There will be quite substantial consequences for the ANC in the short-term from the unions who will fight against the cuts with everything they have.”
Political analyst Shingai Mutizwa-Mangiza said: “To be honest the outlook seems bleak. The unions are not going to like what Mboweni said about across-the-board compensation pay reductions to management level positions, across national, provincial and municipal governments, state-owned entities, all other senior public representatives and this will certainly cause tensions.”
“However, this is not to say that there is no hope for a turnaround. The way forward, given the current bleak economic circumstances, not just in South Africa but across the world, could be a renegotiation of the compact between labour, business and government,” said Mutizwa-Mangiza.
Absa economist Peter Worthington said: “It is hard to know how the market will interpret this MTBPS. The national treasury’s unchanged deficit targets for the current fiscal year may be viewed as encouraging. However, the realisation of these targets is somewhat out of the government’s control, and partially dependent on an ongoing court process.”
“Our view is that the court is likely to force the government to implement the final year of the 2018 wage deal for 2020/21, at a cost of R37.8bn, or 0.8% of GDP.”
Business Leadership South Africa (BLSA) CEO Busi Mavuso said: “BLSA welcomes the minister’s comments on the need to eliminate corruption and investigate wrong-doers. We also had positive indications on backing infrastructure investment plans.”
“These efforts are highly positive for business sentiment. However, a recovery cannot be micro-managed but must be achieved by unleashing the economy to grow, with the state assembling the right foundations,” said Mavuso.
Finance and Economic Opportunities MEC David Maynier said: “The provincial budget has been cut by R86.6 million in this financial year through cuts to conditional grants which includes a cut of R30m to the national tertiary services grant which is critical to us maintaining and developing healthcare services at our tertiary hospitals such as Groote Schuur, Red Cross War Memorial Children's Hospital and Tygerberg Hospital.
“Which means that the bailout for SAA will clearly compromise our healthcare services and the well-being and dignity of those living in the province by de-funding critical projects that provide food security, that support ownership of property and land transformation and that create jobs in the Western Cape,” said Maynier.
“However, there were some positive notes from today’s adjustment budget, in particular commitments to immediate food relief for poor households, support for early childhood development centres and support for job creation initiatives through the provincial roads maintenance programme.”
Black Business Chamber secretary-general Mntuwekhaya Cishe said: “The allocation of R2.2bn to social housing is another positive in the budget, as the Human Settlements Department is one of the sectors that creates work for small business contractors.
“However, the reduction of red tape is just not enough for small businesses. Policies generally are just still unfavourable for small black businesses, they do not foster economic inclusion. From a small business point of view, there is no benefit in the privatisation of SOEs.”
Managing Partner Entrepreneurs for Entrepreneurs (E4E) Africa Philani Sangweni said: “It’s disappointing that the MTBPS contained no mention of support for entrepreneurs, beyond promising to reduce red tape for business.
“Entrepreneurs are our best hope for getting South Africa out of its economic malaise. If we’re not putting entrepreneurship at the heart of our economic recovery plan, how serious are we about it really?” said Sangweni.
Federation of Unions of SA general secretary Riefdah Ajam said: “Integral to the immediate rolling out of the stimulus package should be an announcement of the clear roles that Nedlac social partners are required to play and government to act against all state procurement officers who to fail comply with buy local regulations.
“The localisation drive is going to play a vital role in stimulating the economy and creating jobs on a large enough; scale and the minister’s recommitment to fight corruption in all shapes and sizes,” said Ajam.
In a joint statement, activist groups Cry of the Xcluded, the Assembly of the Unemployed and the Alternative Information and Development Centre said: “Anticipating government’s harsh austerity, the Cry of the Xcluded signalled the inevitable bitter fights to come over economic policy.”
“Such is the level of attack on workers and the poor that we can expect the streets, not the boardrooms, to be the main battlegrounds. The MTBPS is a plan for sending South Africa from recession to economic depression,” said the statement.
Cape Argus