No budget in the world has not had to be revised this year to factor in the impact of Covid-19 on economies. South Africa, although it has been beset by a range of self-inflicted financial woes over the past decade or more, has not been immune. And so Finance Minister Tito Mboweni, where some of his predecessors had to do little more than tweak the medium-term budget, had to wrestle with a projected economic contraction of between seven percent and 13% (in spite of President Cyril Ramaphosa’s rosy hopes of 3,3% growth next year), and the projected loss of R285 billion in tax revenues. Not to mention the prospect of a debt to GDP ratio exceeding 100% within four years, although Mboweni said yesterday he hopes to hold it at 95%.
Equally, he will have been mindful of the fiscal cliff down the road if he allowed his foot to stray from the expenditure brake. He acknowledged that there is “no room for slippage”.
While the nation hung on his words yesterday to see how he would cut waste, he spent much of his speech repeating what Ramaphosa presented as an economic stimulus package: infrastructure spend, more energy capacity, and so on, while emphasising that the R500 billion Covid-19 package has been absorbed by budget reallocations. And yet, borrowing continues and South Africa’s gross debt will grow to R5 trillion.
To dig the country out of its hole, he promised policy certainty and slashing the red tape that strangles business. He also held out the promise, again, that senior public service salaries would be reined in, but that has to been seen to be believed, given that he lost his SAA arguments and has coughed up R10,5 billion to save it. He also threw some more money at the Land Bank, for good measure. It’s not policy that will stop this, but political resolve.
Mboweni quoted Coleridge’s Rime of the Ancient Mariner to draw the lesson that the storm we are in will be weathered. He missed the point, which is that hubris brings great misery. For that, no solution was offered.