[ad_1]
Illustrative image | Source: Minister of Finance, Tito Mboweni. (Photo: EPA-EFE / NIC BOTHMA)
When Finance Minister Tito Mboweni presents his Medium-Term Budget Policy Statement, he must pronounce on what he proposed in the June 19 Covid-19 emergency budget. It’s not going to be pretty.
The numbers are grim, but not unheard of. Tax collection is down at least R304.1 billion from what was expected in February 2020. Debt is rising and rising, with 21 cents on every rand of tax spent on making interest payments.
It will be the narrative of Wednesday’s Medium-Term Budget Policy Statement (MTBPS) that will be key to the credibility of the allocation of regrettable public finances. Previously dismal budget chronicles of empty closets – and how even tough aloe is struggling – have largely been neglected.
One aspect will be to turn the R10.4 billion to SAA, not as a bailout, but as support to staff and creditors as part of a successful corporate bailout. That was the opinion of the Minister of Public Enterprises, Pravin Gordhan, when he spoke with Tim Modise on October 21. (https://www.businesslive.co.za/bdtv/television-shows/political-currency-with-tim-modise/)
“We have a clear government mandate authorized by the Cabinet to move in the direction in which we are moving (business rescue), so we have the best possible outcome. Right now, we have obligations to staff and creditors and we go above and beyond to find the right kind of partner, ”Gordhan told Modise, saying differences of opinion in the Cabinet had been resolved.
And once the cash is available, the restructuring could happen as early as early 2021.
The billions are needed, as presented in Parliament as early as June 2020 for, among other things, reduction of personnel (R2.2 billion), payment of supplier debt (R2.3 billion), payment of aircraft leases (R1.7 billion) and reimbursement of non-flown airline tickets (R3-billion).
SA Express left to fall further into a financial hole, but plans are still underway to revive SAA
That partnership model that Gordhan spoke of would echo the Telkom model, indeed partial privatization. This may well be a practical trade-off for the January 2020 ANC. lekgotla ‘s ideologically motivated decision to keep SAA in the air as a national flag carrier.
Ideological, because while jobs clearly should be a concern, SAA received R15.7 billion from June 2017 to December 2019 when, as part of putting SAA in a business bailout, it received a R5.5 billion ransom. . In the February 2020 budget, the government allocated another R 9.2 billion so that SAA could meet its past due debts.
In comparison, at just R13.8 billion, President Cyril Ramaphosa’s Economic Recovery and Reconstruction Plan of October 15 has promised 800,000 job opportunities by March 31, 2021.
Or compare it to the R6 billion earmarked for a three-month extension of the R350 Covid-19 grant to mitigate rising hunger. That is linked to the loss of 2.2 million suitable jobs due to the forced shutdown of Covid-19, in addition to the reduction of hours of casual workers and a ripple effect in the informal economy that sustains most South Africans.
But it is not just SAA. It is also Eskom that with its R488 billion debt remains the biggest risk to the South African economy.
As the power company severs from transmission, generation and distribution entities, with at least a year behind schedule on the October 2019 roadmap deadlines, the conversation last week turned back to one company. ecological joint to try to offset part of the debt. It was a recommendation from some in the Presidential Task Force on Eskom’s sustainability, but ultimately it was not included in the policy of the Eskom 2019 roadmap.
Instead, the 2019 budget provided Eskom with R 23 billion a year for the next decade and an additional special allocation of R 59 billion for two years ending in March 2021.
Since January, a yes or no to the initiative promoted by Cosatu for approximately R250 billion of that debt that will be assumed by the Public Investment Corporation (PIC), the government-owned asset manager of approximately R2 trillion of pensions and social savings of government employees.
It is understood that Wednesday’s MTBPS would speak to Eskom’s debt.
But state-owned enterprises (SOEs) continue to suffer a hemorrhage in South Africa’s political economy. Much of what has been said about reforming state enterprises to be efficient and effective has not translated into much action.
Denel, seeking another multi-million dollar bailout after having received R600 million in the February budget, all in addition to the R2.3 billion for just over 2,360 jobs for July 2020 through the job activation programs of the government. Or the South African post office struggling to stay afloat. And the SABC and the Land Bank, which received bailouts this year: 1.1 billion rand in February and 3 billion rand in June, respectively. And more.
Instead, the political and ideological machinations around SAA and Eskom in particular, but also corruption, have had serious financial repercussions. Mboweni at the end of the MTBPS cycle faced a not insignificant funding hole after South Africa walked out of the World Bank meeting in October for a $ 2 billion loan as conditionality became important in the current context.
Apart from this funding hole, and the drain of state companies in national finances, the MTBPS should give clear signals about the public wage bill for around 1.2 million civil servants which represents almost 40% of all spending. state.
It was meant to be cut by R160 billion, according to the February Budget, but this got bogged down in political challenge by workers and in a court case over the government’s refusal to implement the 2020 wage adjustments, the final of a three-year agreement.
On October 22, Mboweni gave a curious parliamentary response that seemed to leave the door open for the IMF loan, due to its lack of conditionalities, to be used for the payment of salaries, although it was not specifically intended for that.
But Mboweni’s parliamentary response crucially highlighted the importance of the IMF loan to South Africa’s treasury.
“… it mitigated the need for massive spending cuts in response to the government’s dramatic revenue shortfall and averted an explosion in financing needs triggered by high-cost loans.”
So go back to debt.
That was a central warning in June’s emergency Covid-19 Budget, officially South Africa’s first Special Adjustment Budget that had to cut R140 billion across all departments to fund the national Covid-19 response as announced by Ramaphosa in April.
And even amid mounting criticism of the National Treasury’s overly optimistic forecast, in June Mboweni warned that debt would affect 81.8% of gross domestic product in 2020, up from just over 65% expected in February, and will rise to 87.4% by 2024.
In an open letter Business Leadership South Africa (BLSA) said it “supports a tight budget that aggressively cuts the remaining fat, focused on revenue collection efficiency, significantly restricting the public sector wage bill, and prioritizing social and health spending. recovery needed “.
But, from where the In the leftist and progressive political arena, economists and nongovernmental organizations want more spending on grants, education and healthcare. In their criticism of budget allocations, they quickly and easily invoked austerity.
However, the budget cuts have not affected much of South Africa’s social wage, including a sustained scheme of social subsidies for 18 million South Africans, and do not come close to what is generally considered austerity.
For example, in Greece, starting in 2010, austerity meant millions saw their wages cut and taxes raised, while their government battled a debt crisis until 2017. Similarly, Argentina faced austerity since 2012, exacerbated by the devaluation of the currency in August 2018.
In an open letter Business Leadership South Africa (BLSA) said it “supports a tight budget that aggressively cuts the remaining fat, focused on revenue collection efficiency, significantly restricting the public sector wage bill, and prioritizing social and health spending. recovery needed “.
But then companies also signaled their support for Ramaphosa’s social compaction, which at the National Council for Economic Development and Labor (Nedlac) led to understandings about easy regulatory regimes in key areas such as the energy sector or critical skills visas from Affairs. Internal But even the South African Economic Recovery and Reconstruction Plan was muted about creating what is called the enabling environment. After all, the government has had the last word, and given the ANC’s internal political and ideological dispute, it has erred on the side of state control.
“Companies, through the BLSA, B4SA, and other forums, have provided an incredible amount of technical support, staff, and expertise to the government over the past two and a half years, pro bono, in response to the send me call, ”the BLSA open letter read. “However, a recovery from a crisis of this depth cannot be micromanaged and must be unleashed with the state putting together the right foundations.”
With some exceptions, the institutional and state capacity to convert rands and pennies into quality services for the public good is lacking. This weak public administration stands out in investigations so far into widespread Covid-19 bidding corruption for the benefit of the politically connected.
In South Africa’s robust body politic, everyone has a wish list. The money is simply not available for this to happen. That’s the Mboweni narrative. DM
