Sheldon Friedericksen writes that Tito Mboweni did not go far enough in his Medium-Term Budget Policy Statement because he might have been concerned about political consequences.
Another year, another crisis-level speech with strong budgetary warnings delivered by Minister of Finance Tito Mboweni at this year’s Medium-Term Budget Policy Statement. What was touted – albeit not by the minister himself – as the most important medium-term budget since 1994, unfortunately gave us very little meat to chew on.
I don’t envy Minister Mboweni or his position, but as a leader in a key role, now was the time to step up strongly, irrespective of the political consequences. But, in his address, many would argue that he simply did not go far enough.
We got the numbers and were told that things are going to get worse before they get better, but there was nothing new in this vague assessment. If we read between the lines, as we so often have to do, it means they don’t yet have a concrete answer to our problems, especially if government is not willing to change.
It’s another case of much talk, with little concrete action to be seen. The government, in fact, has plenty of low-hanging fruit to grab a hold of and provide some measure of immediate relief, one of which was our infamous public sector wage bill.
Government clearly doesn’t have an agreement with the public sector unions, a task that should only require talking. So, the public sector wage bill is going to remain a major expenditure at a time where every cent saved can be redeployed into investments that grow the economy and also signal positive moves to credit rating agencies.
Business as usual for the private sector
Speaking as an investor, it’s just another day really. As an investment firm in the private sector, it has always been Fedgroup’s obligation to keep an eye on the general economy, but the budget speech didn’t change our viewpoint.
What it did was reaffirm the private sector’s general view of the state of the economy. We were right all along, as Minister Mboweni toted an industrialised economy with a focus on "local is lekker" policies through public private partnerships (PPPs) and an ease to doing business in South Africa, to grow our economy and revenue base in South Africa.
The 'three Ps' of economic success
The idea of PPPs is really where rubber meets the road. Minister Mboweni said it in his speech, stating that government can’t do everything and that all sectors will be required to play their part. This is fine and well, if they trust that government will consistently play their part as well exists.
Let’s not mince words: if you are in the private sector and have worked with the state to any degree, you will know they are almost impossible to do business with. For many, court cases are the only route to getting paid, let alone paid on time.
If the public sector is able to come to fair terms, and when it is able to implement clear and consistent policies, and identify that skills and resources are not always required inhouse, then perhaps more public-private partnerships will sustainably see the light of day and we can start tackling our debt crisis.
Debt is not the enemy
Although our debt-to-GDP ratio was the theme of the day, we must remember that debt is not the enemy here. Frivolous and wasteful spending is the true enemy of fiscal sustainability.
Investing a further R10.5 billion into SAA, regardless of whether the money comes from government coffers, has in the past become the definition of frivolous spending. When we invest, we are investing in something with a solid business plan that is supposed to deliver returns that will not only repay the debt over a defined period but produce a real return into the economy.
SAA may just be the true indicator of our government’s commitment to change and its penchant to going it alone without executing with industry specialist partners. Otherwise, why would they renege on their promise of no further funding to get debt under control, especially at such a crucial time?
Not all doom and gloom
The economic journey ahead is fraught with risk but we are a nation built on hope so there is still light at the end of this narrow pathway that we are required to walk together. While, admittedly, there is a lot of risk, particularly on the upside, there are people and entities out there willing to take it on, but Minister Mboweni and Cabinet need to meet them halfway.
It’s not going to be easy and is going to take hard work, but through consistent policy and a change in the prioritisation and alignment of outcomes, we can still become the economic hub we were always destined to be. We CAN grow an African continent and lead the continental economy, but will only do so in a transparent fashion that is mutually beneficial to all parties.
To President Ramaphosa and Minister Mboweni – South Africa is behind this clear and decisive plan and I have no doubt that we will step up when our numbers are called. But please know that you do have support to take the first steps.
- Sheldon Friedericksen, Chief Financial Officer at Fedgroup