Godongwana is no exception to his eight predecessors as SA’s ninth minister of finance
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CAPE TOWN - South African finance ministers since and post the Zuma presidency have been confronted by one overriding issue – dealing with the legacy of rampant state capture, kleptocracy, cronyism and corruption.
Enoch Godongwana, South Africa’s ninth minister of finance since democracy in 1994, is no exception!
Tabling his Medium Term Budget Policy Statement (MTBPS) to Parliament last Thursday, he had little option but to roll out a now familiar mantra of the dire state of the economy, the people’s resilience and the government’s “unflinching commitment to fiscal sustainability enabling long-term growth by narrowing the budget deficit and stabilising debt.”
To what extent does Godongwana’s MTBPS theme “A Resilient South Africa Making Hard Choices in Difficult Times” reflect reality on the ground for millions of his compatriots faced with the rising cost of living, unemployment at 34.4% with youth and women bearing the brunt and a burgeoning public debt totalling R4 trillion?
The debt-service costs alone “are expected to rise from R269.2bn in 2021/22 to R365.8bn in 2024/25.”
While this legacy continues to be a heavy burden on the state, it has been compounded by ongoing corruption at both local and national government levels albeit on a lesser scale, self-entitlement, policy ineffectiveness and some degree of incompetence due to a political obsession with cadre deployment.
Add the disruption of the 2008 global final crisis, the Covid-19 pandemic in March 2020, exacerbated by pandemic profiteering, a slow roll-out of vaccinations, the riots in July and the ruling ANC government’s failure to deliver on core pledges on employment, reining in public finances, a bloated public sector and its unrealistic wage demands, eradicating gender-based violence, an affordable cost of living – in other words improving the socio-economic lot of the immediate post-apartheid generations who have wilfully been left behind.
The tendency has been to tinker with economic and fiscal policies at the edges which have spectacularly failed to deliver on core expectations and as the recent nationwide local elections showed, is threatening to spawn a new generation of South Africans whose apathy to voting matches their lack of trust in their politicians.
The ANC’s economic policy also beholden to ideological factionalism within the party as if economic and fiscal policy is seemingly caught in a time warp mingling state control and wanton redistributive measures with flirting with a reluctant private sector at unease with the financial and political risks and a wider public private partnership (PPP).
The truth is that the ANC is suffering from a “Crisis of Credibility”.
On Wednesday, the Nehawu trade union resumed picketing across the country in solidarity with ANC party workers “as a result of the continued failure by the ANC in paying their salaries.”
How on earth can South Africans have faith in a party to sort out the dire state of the economy and finances of the country when it can’t even pay the salaries of its own staff?
The MTBPS shows a rebound in FH2021 “reflecting less stringent Covid-19 restrictions, lower interest rates, strong international demand and higher commodity prices.”
The economy is projected to grow by 5.1% in 2021, from a 6.4% contraction in 2020. GDP growth will flatten to a projected 1.7% over the next three years, “reflecting structural weaknesses including inadequate electricity supply.”
Economic recovery will depend on vaccine roll out which could reduce risks of future waves of the pandemic and associated disruptions to economic activity.
Tax collections have exceeded short-term expectations thanks to higher taxes from mining companies due to higher commodity prices.
Revenue for 2021/22 is now projected at R1.5 trillion, compared to R1.4 trillion at the time of the 2021 Budget in February.
The consolidated budget deficit is expected to be 7.8% of GDP in 2021/22, gradually lowering to 4.9 percent in 2024/25. According to Stats SA, inflation held steady in October at 5%, unchanged from the September figure.
But for the 64-year-old Godongwana, erstwhile ANC economic guru, there seems to be a change in policy nuance.
“Critical to our fiscal path is the need to be unambiguous on trade-offs we are willing to make as a nation. We cannot do everything at the same time. Equally important is the faster implementation of structural reforms to unlock greater private sector investment, economic growth and job creation. A fast-growing economy will allow for greater revenue collection, making it possible for more comprehensive responses to the challenges we face,” he added.
SOEs are the bane of ANC governments. Since 2013, the government has spent over R290bn to bail out SOEs. The Treasury has allocated no additional funding for SOEs, save where MoF guarantees have been called by creditors. Godongwana is now talking about “letting go of those SOEs that are no longer considered strategically relevant.”
He claims the government has begun to reduce its reliance on the ailing electricity utility Eskom by diversifying primary energy sources through the Bid Window 5 for 25 IPP projects under the latest Renewable Energy Independent Power Producer (REIPP) programme, expected to generate 2500MW at a weighted average price of 47.3 cents per KWH, one of the lowest in the world.
Transnet Freight Rail too will allow private sector access to the freight rail network by end 2022.
Infrastructure development is a crucial challenge. The Treasury recently unveiled 55 new projects in various sectors valued at R595bn, with a funding gap of around R441bn.
The Infrastructure Fund is allocating R100bn over the next decade. The only viable way the gap can be narrowed is through PPPs.
Stats SA recently warned that the public-sector investment in infrastructure has waned since 2016, declining by R82 billion. In 2019 it declined from R90bn to R76 billion in 2020, led by cutbacks from Eskom and provincial governments and municipalities.
* Parker is an economist and writer based in London