In his pre-budget press conference, which he quaintly termed his ‘maiden’ press conference, finance minister Tito Mboweni revealed how much his thinking has changed in the last 12 years – and possibly diverges from traditional ANC thinking.
“We need to move from the notion that everything must be done by the state. I have a problem with this term ‘service delivery’. People are sitting at home waiting for me to deliver bread instead of building their own bakeries.
“We need to move towards partnerships. Let’s bring in private sector experience in project execution. There are engineers and others in the country who are willing to work, you just need to call on them.”
There also needs to be a ‘reconfiguration of SOEs’, he said. “There is a lot that is contained in that term. We need to be open to inviting in equity partners, closure of some business activities, restart if needs be.”
From there he went on to make specific reference to restructuring at Eskom and SAA. “Swissair was not functioning well and the Swiss decided to close it down. They invited those who know how to run airlines and start a new airline called Swiss International. We need to be open-minded, the world has changed. It is not static.”
Referring specifically to the medium-term budget policy statement (MTBPS) – which provides clarity on government thinking and budgeting over a three-year period – he said: “In this new way of thinking – which is actually the old way of thinking – the focus has to be utilising the tax revenue that you have.”
And this is where the rubber hits the road.
Government’s consolidated expenditure is growing at 7.8% a year on average. In reality, real non-interest spending (which excludes debt repayments) is growing at 1.9% a year – just ahead of the population growth rate (1.2%). This is a far cry from SA’s glory days between 2005 and 2009 when non-interest spending was growing at between 7.2% and 10.8% a year.
Yes, the budget was in surplus and the world was a different place, but decisions made at the many crossroads SA has faced since then now require a wholesale U-turn when it comes to economic management of SA’s economy and the state institutions. While the global economy is projected to grow at 3.7% next year, SA limps along at 0.7% this year only reaching a projected 2.3% by 2021.
This makes the focus on growing the economy, while at the same time rooting out corruption and inefficiency, reforming SOEs, enhancing infrastructure investment and addressing urgent matters in education and health all the more pressing.
“The Giyani Water Project is a cesspool of corruption,” the minister said in his MTBPS address to Parliament. “It is clear that a new delivery and financing model is required to provide water services to communities… I have asked the DG of National Treasury to work with the department of Water and Sanitation to ensure that appropriate action is taken against all guilty officials implicated in the Auditor-General’s report.”
In his annual report, the Auditor-General identified another R27 billion of previously undiscovered irregular spending. R27 billion! That is almost equivalent to the revenue shortfall for this year. In the meantime, public debt continues to expand ahead of expectations to 59.6% of GDP in 2023/24, while unemployment and public dissatisfaction remain at stubbornly high levels.
There is no doubt in anyone’s mind that no economic stimulus package can be sustained without focusing on corruption and service delivery. “We must stop talking in contradictory terms,” Mboweni added.
However, the MTBPS did not add much additional detail on the implementation of the economic reforms, which include:
- The draft policy direction for licensing high-demand spectrum has been issued. This will be allocated by April next year.
- Work is underway on restructuring options for the electricity sector. (This must include a long-term plan to restructure Eskom and deal with its debt obligations.)
- The economic regulation of Transport Bill is before Parliament.
- The Mining Charter has been approved by Cabinet.
- Visa regulations are being amended to boost tourism.
In addition to the growth-enhancing economic reforms, the MTBPS expands slightly on four other measures to stimulate the economy:
“We are proposing a combination of reprioritisation, changes to grant structures and in-year allocations amounting to more than R50 billion,” Mboweni said.
Of this R15.9 billion goes towards better-spending infrastructure programmes, clothing and textile incentives, and the Expanded Public Works Programme. As an indication of success, the clothing and textile competitiveness program sector has helped sector exports grow from R7.1 billion in 2008 to R25.1 billion in 2017.
Another R16.5 billion is allocated to various programmes and entities, including funding for Sars, a minimum wage for community health workers, critical posts in health and management of the justice system.
Agriculture will be an important driver of SA’s economic recovery and the Land Bank will remain central. “Our reprioritisation efforts will support the bank to conclude transactions worth R16.2 billion over the next three to five years that will create jobs in agriculture.”
Government planning around the proposed Infrastructure Fund is advancing in partnership with development finance institutions and private sector partners. Funding is being negotiated from DFIs, multilateral development banks and private banks. In addition, these institutions have committed technical resources to help plan, approve, manage and implement projects.
While infrastructure funding and development is one lever with which to grow the economy, the government cannot do it alone. This is evidenced by the fact that gross fixed-capital formation (public and private sector investment in physical assets) has declined significantly in recent years.
Thus it is now a government policy objective to promote an increase in fixed capital investment by the private sector.
Policy certainty along with a U-turn on the role that business can play in the economy will go a long way to changing that.