Finance Minister Tito Mboweni’s trusty aloe has probably died.
Dragged to parliament on budget day every year, and mini-budget day last year, Mboweni praised his aloe ferox plant for its perseverance in difficult times, promising that SA would flourish under difficult circumstances like his hardy little succulent.
It looks like even the hardy aloe has its limits and, after years of suffering under increasingly tougher economic conditions, it is apparently no longer with us. Mboweni pitched up at the (largely virtual) sitting of parliament to table the 2021/2022 national budget a few minutes to 14h00 without his usual sidekick.
But Mboweni still delivered a positive message, urging South Africans to look past the current difficulties and to work for a better future.
He preached responsibility in public finances to build a better future
“We must leave this earth much better than we found it so that future generations can enjoy a better world.
“Today I want to outline how we can leave his economy in a better shape for those who come after us.
“We have crafted a fiscal framework that extends support to the economy and public health services in the short term, while ensuring the sustainability of our public finances in the medium term,” said Mboweni.
Once again, Mboweni succeeded in making a difficult task seem easy.
He announced no special wealth or health tax, didn’t increase Vat, announced income tax relief to middle-income taxpayers and reduced company tax to spur economic growth.
Still, the numbers are growing. Budgeted revenue is projected to increase to R1.53 trillion in 2021, with Mboweni apparently taking a snipe at his fellow members of parliament to realise the value of money.
“When I was writing these numbers, mister President, R1.53 trillion, I was tempted to ask one of the members of the house how many zeroes are in a trillion, but I thought not to do that,” joked Mboweni.
It’s a lot of zeroes …
For the record, it is a lot of money. R1.53 trillion is R1 530 billion, or R1 530 000 000 000.
A quick exercise puts it into perspective, while apologising for not remembering the source: If anyone would be so kind to give me R1 every second of the day, 24 hours a day, I will have R1 million by around noon on day 12. That would be Tuesday the week after next.
My bank balance will hit R1 billion only 32 years later, and R1.53 trillion around the time I celebrate my 49 247th birthday, give or take a few decades to compensate for leap years.
While not announcing sharp tax increases, Mboweni didn’t announce severe cuts in state spending either, saying that government should aim to keep its spending from increasing from current levels. “There has been a significant improvement in the fiscal framework,” he said.
His plan could allow government debt to stabilise at levels lower than previously predicted – if Mboweni gets the backing from state departments and state-owned companies.
In short, the plan to self-correct government finances over time will only work if theft, corruption and inefficiencies correct as well.
He explained that high government debt levels increase the cost of borrowing across the economy. “The rising debt leads to higher future taxation and uncertainty. Servicing this rising debt takes away resources that could have been invested in infrastructure and frays our social solidarity.”
Mboweni cautioned that an “incorrect notion” has taken hold that government is “swimming in cash”.
“Certainly, compared to last October, we are in a better place. But our assessment from the Supplementary Budget in June last year still stands: our public finances are dangerously overstretched.
“Our borrowing requirement will remain well above R500 billion in each year of the medium term despite the modest improvements in our fiscal position. Consequently, gross loan debt will increase from R3.95 trillion in the current fiscal year to R5.2 trillion in 2023/24,” he said.
No to austerity
Mboweni pointed out that the majority of government expenditure goes towards social services.
“When we talk about austerity this and austerity that, you can’t,” he said.
“This is not supported by empirical evidence.”
Deviating from his written speech, Mboweni urged his fellow ministers: “Getting our fiscal house in order is the biggest contribution we can make to get our house in order.”
Referring to difficult decisions, he added: “On this we are resolute. We remain adament that fiscal prudence is the best way forward. We cannot allow our economy to have feet of clay.”
He repeated that higher borrowings increase the cost of interest and take away resources that could have been invested in infrastructure, referring to SA’s good roads and rail network that drives economic activity, conceding that it needs better maintenance.
In another deviation of his prepared statement, he referred to the need of users to pay for services and the need to look after infrastructure.
“All the efforts are wasted if the end user does not pay the cost of a cost-reflective tariff for use. Efficient fee for the use. The principle of user pays is very important.” He repeated this to drive the message home.
“The other thing is the tendency among us, or some of us, to destroy infrastructure. We build a police station, they burn it. Tomorrow they demonstrate that they need a police station. It doesn’t make sense,” said Mboweni.
“We cannot do this anymore. We need to confront the destruction of our infrastructure.”
He numbered several points of hope, from economic recovery to a quick resolution of the Covid-19 pandemic.
The central theme is that SA can survive and prosper, if everybody does their best.
Maybe the little aloe is well after all and Mboweni just forgot it at home.