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Finance Minister Tito Mboweni (right) makes his way to deliver the mini budget. (Photo: Gallo Images / Jeffrey Abrahams)
Wednesday’s Medium-Term Budget Policy Statement is a political balance sheet. Compensation juggles the billions of the SAA bailout, a cooldown in public wages, and legislative changes to allow workers early access to retirement savings. Political compensations dominated; otherwise it was much ado about nothing.
The takeaway figures should have been the government’s daily indebtedness of R2.1 billion, bringing debt to 95.3% of gross domestic product by 2025. And that debt service costs are “the element of fastest growing spending “, such as the Medium-Term Budget Policy Statement (MTBPS) put it; In 2021 South Africa will spend more on debt service than on health: R 271.8 billion in debt service costs compared to R 35.3 billion on health.
The government’s level of indebtedness displaces the investment that is crucially needed, for example, in infrastructure, much of which has been kicked in to touch public-private partnerships in the Economic Recovery and Reconstruction Plan. It means stealing from Peter to pay Paul, as illustrated by the R6.8 billion taken from public employment programs to pay for the three-month extension of the R350 Covid-19 grant until January 2021.
The amount to take away impregnated with political spin was R10.5 billion, for the “rescue” of SAA, as expressed by the opposition and others. Or “corporate bailout,” as Finance Minister Tito Mboweni put it, following the example of Public Enterprises Minister Pravin Gordhan, who disbursed those billions in support of downsizing and supplier payments.
“There is no bailout for SAA. The R10.5 billion are part of the business rescue plan. There is no rescue, ”said a Mboweni who sounded rather grumpy to reporters at a post-MTBPS briefing.
But that’s a twist because, simply put, the airline’s capital partner that is talked about and promoted so much has not materialized. And the clock is ticking business rescue plan to keep SAA on the air in line with the ruling ANC from January 2020 lekgotla decision to hire a national flag airline.
SA Express left to fall further into a financial hole, but plans are still underway to revive SAA
For SAA to get its R10.5 billion, almost all departments must give up rands and cents – from police, home affairs, international relations to agriculture, according to the adjusted cost estimate. Those departmental cuts totaling R6.97 billion, together with R3.529 billion of what was already announced in the 2020 Budget, get SAA its bailout.
No applause except for SAA as Tito Mboweni offers spending cuts, public wage freezes and signs of tax increases
To test the public finance numbers, Mboweni said that tax increases of R5 billion are needed in 2021, up to R10 billion in 2022/23, R10 billion in 2023/24 and finally to R15 billion in 2024/25 . effectively tax increases of 40 billion rand over four years. It’s a bitter pill for consumers hit by food price hikes above inflation and rising prices across the board, also at the municipal level.
However, tax increases may be the easiest revenue collection measures to implement. Mboweni’s call to consider a “proposal for general salary reductions for managerial level positions, in national, provincial and municipal governments, state entities and all other high-level public representatives, was not so comfortable.” Or the public wage chill that should limit the salaries of South Africa’s 1.3 million civil servants to increases of 0.8%, effectively for the provision of pensions and health care, over the next three years.
But that politically unpopular call for public sector pay restraint and insistence on the need for an effective pay freeze in the public sector is pretty much all that Mboweni had left after his defeat in the thousands. million SAA.
That he was able to make this call for a public sector wage freeze, albeit with few details, is the political margin given him by colleagues in the Finance Minister’s cabinet. For now. Given the impending 2021 local government poll that requires a manifesto of electoral promises, cabinet support may wane.
In fact, the finance minister at Wednesday’s post-MTBPS press conference appeared to have been rammed into his lane. “I’m staying in my lane,” was his response to repeated questions about the coldness of the public wage bill.
“The country is looking forward to a positive outcome,” it was almost as much as Mboweni said before kicking to touch the Minister of Administration and Public Service, Senzo Mchunu, and others.
“Political decisions must be taken by the leadership, by the political parties themselves and the political leadership in different forums such as Parliament, Legislatures and Councils.”
Mboweni appeared to have stayed on the straight and narrow path, with a question about why the MTBPS omitted details about the National Health Insurance, which the Director General of the National Treasury, Dondo Mogajane, considered unrelated to the topic of the day.
But, unlike his optimistic speech, he clearly aimed to align himself with the optimistic outlook of the socially compacted. Economic recovery and reconstruction plan, Mboweni briefly returned to his more cautious traditional stance.
Despite the specter of the debt spiral, Mboweni delivers a determined, half-filled speech
“We are in a bind here. We need to figure this out, “he said before turning back to,” I’m staying in my lane.
Rammed, gagged, or simply bowing to the collective decision-making traditions in the politically contested ruling ANC. Exactly what the political defeat is yet to be revealed, but rumors of Mboweni’s resignation, possibly as early as the end of the year, may still take on new life.
Regardless of the political turn, the opposition demanded the SAA bailout in the billions.
DA MP Geordin Hill-Lewis said Mboweni broke two commitments: to control debt by 2023, a commitment made just three months ago in the June Special Allocation Budget, and to stop the SAA bailout. “It’s very, very disturbing and disappointing.”
IFP national spokesperson Mkhuleko Hlengwa said South Africa was in dire straits due to the consequences of failed economic management. “Mboweni confirmed our worst fears.”
Freedom Front Plus leader Pieter Groenewald said the finance minister had rigged the budget, but that “it was nothing more than rearranging the deck chairs on the Titanic.”
Head Whip of the United Democratic Movement Nqabayomzi Kwankwa compared Mboweni’s MTBPS to a family vendor who buys a Christmas tree while children are starving.
ANC chief Pemmy Majodina provided a rare show of support. It was about bailing out SAA, he said, adding that clear financing for economic recovery was key. “We all have to do our part; this is the new normal. ”
Business Leadership South Africa (BLSA) did not seem very enthusiastic, repeating calls for clearly established projects in infrastructure and energy so companies could invest, along with freedom of contract, including a fresh and managed key skills visa roster from efficiently.
“We didn’t need to see spending on SAA, but unfortunately R10.5 billion of money from other departments and programs has been reallocated to SAA, which will now not be spent on social needs and investments. We hope that SAA and other similar non-investment expenses have been left behind, ”said BLSA CEO Busi Mavuso.
Agri SA said Mboweni had missed ripe fruit opportunities, including providing more support to the agricultural sector while supporting SAA. “Effective implementation remains critical in the pursuit of a prosperous economic future for all.”
The Cosatu labor federation was scathing. “We accept the pay freeze for top managers and politicians, but any talk of a pay freeze for underpaid civil servants will be seen as a direct attack on collective bargaining.”
He was equally critical about the lack of details on fighting corruption, but the ANC alliance partner welcomed the extension of the R350 Covid-19 grant and the promise of Allow workers in danger or who have lost their wages to access a part of their pension funds. That bill must urgently be presented to Parliament for it to come into force by 2021 at the latest.
What Wednesday’s MTBPS made clear is the interconnectedness of political commitment and the public purse. Mboweni was defeated in the billions of the SAA bailout, but was given some leeway in what is effectively a public wage freeze to try to keep South Africa out of a debt crisis.
But as long as the focus is on the turnaround, the narrative of economic reconstruction and recovery, rather than the specifics of clear actions, South Africa remains precariously balanced on tax advantage.
It remains to be seen how long Mboweni decides to be a part of that, to stay in his lane, as he put it himself. DM
