The Medium-Term Budget Policy Statement (MTBPS) always disappoints because it never provides detailed information about the country’s immediate challenges.
This year’s MTBPS was no exception, as there were no definitive announcements of policy amendments or interventions to address the country’s key challenges.
What was revealing, though, was the convincing demeanour of the new finance minister, Enoch Godongwana.
This was critical, as he had to step into the big and confident shoes of his predecessor Tito Mboweni. I think he was able to do this.
But, Godongwana can count his lucky stars for two key developments, which made his message a lot more positive than it would have been. They are the commodities boom and an aggressive rebasing of the GDP, which resulted in the latter being 11% larger than previously thought.
These factors – which were totally out of his and the government’s control – have boosted tax revenues and increased the size of the GDP to such an extent that it pulled back the country’s fiscal position from the verge of a very deep precipice.
The commodities boom resulted in tax revenue exceeding estimates by a mammoth R120 billion. This is not small change and will plug many holes in need of cash. Hopefully, this money will end up in economic development initiatives and not in bailout packages for more state-owned enterprises.
The GDP rebasing may have a more positive impact. It will result in deficit and debt levels being measured against a larger GDP, making them a lot more favourable.
According to the MTBPS, the budget deficit will narrow from 7.8% of GDP in the current financial year to 4.9% in 2024/25. It is a lot better than the dire picture Mboweni painted in the February budget, when he foresaw that the deficit could exceed 14%.
The debt to GDP ratio also looks a lot better. Before the outbreak of Covid-19, the ratio was fast approaching 100% of GDP. The government now expects a much lower level of around 70% in February next year. It will, according to the MTBPS, peak at 78% in 2024/2025.
If this is achieved, it will represent a remarkable recovery.
The question is whether Godongwana and his colleagues can appreciate the impact of the heaven-sent windfall and use it productively. On paper, at least, as articulated by the MTBPS, it seems as if they have.
However, the government’s long record of broken promises has created a lot of scepticism.
South Africa is not a happy place. I listened to Godongwana on the Moneyweb live stream on my cellphone, with expensive mobile data due to load shedding.
Earlier on Thursday, I drove past a factory where many workers were standing idle while waiting for the power to come back on. The factory’s owners’ costs are exponentially higher.
It is also the reason why business and investor confidence levels remain at record lows. It is indicative of a trust deficit in the government’s ability to address rudimental structural problems to create a pro-business environment.
What is most frustrating is that our beautiful country is blessed with the resources, commodities, financial systems and geographical significance to make it relatively easy for the economy to grow at 3%+.
But then again, South Africa has never lived up to its potential; its people’s resilience has kept us going.
The proof, as always, of the pudding is in the eating.
We are tired of being promised that a tasting is on its way. Godongwana, and his government colleagues, must stop talking and put it on the table for everyone to taste.
Listen/read transcript: Alexander Forbes chief economist Isaah Mhlanga shares economic takeaways from MTBPS 2021