OPINION: Many developed economies have governments whose debt to GDP ratio is higher than SA’s, they know how to utilise these monetary facilities to their advantage. We need to learn to give more (spend wisely), in order to increase our tax revenue, writes Monde Ndlovu.
In the words of Lot Ndlovu, “Those that have their hands on the levers of power should tremble each time they make decisions, because what they do now will eventually affect the community out there.”
These timeless words ring true today, as we continue to reflect on the state of the nation and the role of both the government and business in transforming the country. Trembling before making decisions means that, in all consultative processes, those who hold power make decisions that are in the best interest of the people, consistently, for its own sake. If leaders therefore do not tremble, they will falter each time, because these decisions would not be made with careful and thoughtful consideration.
A Shangan proverb states, “Xandla famba xandla vuya,” meaning that in order to receive, the hand must stretch and give. The upcoming budget speech which follows and expands on the State of the Nation Address (Sona), is highly anticipated. By the time this piece is published, the National Treasury would know exactly what is in the budget for 2022-2023. We therefore make input in the public discourse for further points of debate on the decision-making process of government around the budget.
The Shangan proverb sets the tone for the kind of leadership that should exist in an emerging economy like South Africa. We are also on the brink of submerging in the process.
The World Bank has highlighted five key areas that threaten the “emergence” of the country, namely, prolonged economic stagnation, employment and livelihood crisis, state collapse, failure of public infrastructure, and proliferation of illicit economic activity.
These five key areas summarise the crux of what makes South Africa both an emerging and submerging economy. With no economic growth and inclusion, employment and livelihoods will further deepen, without careful guarding of public infrastructure and maintenance, illicit economic activity will thrive, and without transformation the vast majority of South Africans will remain outside of the economic arena, and the potential for growth and tax revenue will be stunted.
State collapse, therefore, would be the main lever that would proliferate the others. At the heart of state capacity is the critical role of leadership effectiveness and behaviour in an emerging economy. What drives this emerging mindset are the principles that should underpin both the Sona and the budget.
Many commentators in the public domain raise the issue of government debt, which is currently at 80.3% of GDP, and tax revenue generation. The private sector is more concerned about economic growth and policy certainty, while the government remains under pressure to contain spending and regulate its involvement in the economy.
The stubbornly high unemployment rate of 34.9%, coupled with a youth unemployment rate of 66.5%, the brazen inequality which has been noted the world over as the most unequal society in the world, with over 50% of the population living in poverty, and around 28 million on some form of social grant, this demands a budget that is bold and unapologetic in behaving like an emerging economy, and not a submerging one.
In the words of Finance Minister Enoch Godongwana at an event in September 2021, “It is not just the allocation of resources that matters, but also the market structures, institutions and sectors that are enforced or transformed as a result of the deployment of fiscal resources.”
The minister therefore has been making critical connections as far as fiscal and industrial policy is concerned. South Africa has allowed itself to deindustrialise since the early 1999’s and moved the economy into a tertiary dominated economy. This allocation of resources through the budget needs to have in mind the developmental needs of a post-Covid socio-economic landscape.
This budget needs to prioritise the reindustrialising of the economy, also the need to reawaken the TVET colleges, as a giant for industrialising. Currently, manufacturing has a 13% share of GDP, and finance becoming the largest industry at 24% of GDP. The top three spending lines in the budget are learning and culture, health, and social development. In the previous budget, learning and culture were allocated R402.9 billion.
When you further unpack learning and culture, technical and vocational education and training received the smallest allocation at R13 billion. In addition to this, less than 5% of the population have TVET colleges certificates. If the country is to make greater strides in development and reindustrialisation, the technical needs of the economy must take precedent in all respects.
The budget should follow the economic direction the country needs to take, and in the spirit of the Shangan proverb, in order to receive more tax revenue to fund governments programmes, the government needs to stretch out its hand and give.
Many developed economies have governments whose debt to GDP ratio is higher than South Africa’s, they know how to utilise these monetary facilities to their advantage. We need to learn to give more (spend wisely), in order to increase our tax revenue.
* Monde Ndlovu is Head: Advocacy and Thought Leadership at the Black Management Forum.
** The views expressed here are not necessarily those of IOL and Independent Media.
Insider