The minister’s speech came late. This was despite promises by Treasury officials that the budget speech would be delivered to journalists and economists in the media ‘lock-up’ well before Finance Minister Tito Mboweni began delivering it at 13:00 on Wednesday.
They said it was still being written and would be sent as soon as it was completed. It eventually arrived an hour before Mboweni delivered it.
Looking at the budget documents provided to journalists ahead of the lock-up, it’s not surprising that Mboweni was working until the last minute to finalise it. In these documents, he is proposing a R160.2 billion reduction to the wage bill of national and provincial departments, and national public entities over the next three years, to offset the fiscal cliff.
The public wage bill has ballooned over the past ten years. In the 2019/2020 financial year it accounted for about 47% of total revenue. Mboweni wants to bring this down to just over 42% for this year. This will, however, depend on whether he can get the trade unions to agree to the R37.8 billion cut for this year.
This looks like a difficult sell. The unions have already said they will not entertain thoughts of a wage freeze.
Looking at the steepness of the cuts, Mboweni has more than a freeze in mind.
“The employer has tabled an agenda item on the management of the public service wage bill at the Public Service Coordinating Bargaining Council. The focus is to discuss containment of costs in the final phase of implementation of the current wage agreement.”
He was cryptic, however, on how this would be done: “There is more than one way in which this goal can be achieved. Organised labour understands where we are. They have made constructive proposals on a range of issues.”
The tax revenue figures show he has little option.
Corporate income tax is projected to drop from R230.2 billion to R216.7 billion, while personal income tax is only anticipated to rise R19 billion to R546.7 billion for the 2020/2021 financial year.
This has seen the deficit rocket to R370 billion – making up 6.8% of GDP. This is a deterioration of the past year’s deficit of R242 billion, which made up 4.7% of GDP.
The fall in personal and corporate taxes is indicative of the weakness of the economy, which is only expected to grow 0.9% this year.
The difficulties facing South Africa are not lost on the minister, who has had a hard time getting senior figures within the ANC to accept the harsh medicine required to fix the country.
He reminded all that if the difficulties are not tackled, solutions like those pushed on South African Airlines (SAA) by its business rescue practitioners will need to be faced.
“The SAA Sword of Damocles has now fallen on us,” he notes.
Mboweni is, however, hopeful. He noted that the Springboks lost 57-nil to the All Blacks two years before going on to win the rugby world cup last year.
Hopefully, he will turn out to be as good a finance minister as Rassie Erasmus is a rugby coach.