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Finance Minister Tito Mboweni, left, and President Cyril Ramaphosa. (Photos: Gallo Images / Ziyaad Douglas | Simon Dawson / Bloomberg via Getty Images)
Finance Minister Tito Mboweni asked Parliament for a one-week delay for the Medium-Term Budget Policy Statement. That date will be postponed in the parliamentary programming committee on Thursday. But that this is unfolding in this last stage is indicative of SA’s messy political economy.
The letter requesting a week-long delay to the Medium Term Budget Policy Statement (MTBPS) from Finance Minister Tito Mboweni to the Speaker of the National Assembly, Thandi Modise, arrived after business hours Tuesday evening. Daily maverick confirmed.
And although officially the parliamentary programming committee on Thursday morning must make a final decision, it is very likely that the MTBPS will be moved from Wednesday, October 21 to a week later, on October 28.
It’s an interesting development in economic announcements. Much attention will be focused on Thursday’s joint parliamentary session for President Cyril Ramaphosa to introduce what is called the Economic recovery and reconstruction plan. A briefing for the cabinet lekgotla October 7-8 shows that the plan focuses on infrastructure-driven economic growth, with eight priority areas, even if it lacks specific deadlines and funding details.
But that presidential economic recovery plan qualifies as the moment of hope. The harsh reality will be the MTBPS 2020, since The harsh Covid-19 lockdown led to an economy already in recession, with a R304 billion drop in tax collections as poverty, hunger and inequality increased, while at least 2 were lost, 2 million jobs.
On the path of social compaction to get to this point, some twists and turns unfolded, not unrelated to the way ideological and political decisions are forcing tough choices. real life offsets.
SAA, which requires initial R10.4 billion to stay afloat in line with the January 2020 ANC lekgotla The decision to retain a national flag carrier is one of those sticking points. More importantly, so is a key funding hole, apparently related to SAA.
South Africa was unable to secure a World Bank loan in time that was important in Covid-19 budget planning. All other international loans were obtained in July, from the $ 1 billion loan from the New Development, or BRICS, Bank, the $ 304 million or R5 billion loan from the African Development Bank, to the R4 International Monetary Fund, 3 billion. (IMF) rapid financing instrument.
Intellidex analyst Peter Attard Montalto, in a recent report, said that South Africa had walked away from the October 22 meeting of the World Bank as discussions over a $ 2 billion credit line had stalled. This, he said, was because the World Bank refocused on conditionalities for its budget support loans for a variety of reasons, including the Eskom Medupi power plant loan in default, budget support for SAA, the corruption and general fiscal consolidation efforts.
When asked about the role of SAA funding in the stalled World Bank lending discussions, the National Treasury said that “The loan is being negotiated and the result of it will be announced” – and referred inquiries to SAA and its business rescue professionals.
The reasons for this referral are not clear, since these international financial negotiations are traditionally carried out by the Directorate of International Relations and Finance of the National Treasury.
Louise Brugman, a spokesperson for SAA business rescue professionals Les Matuson and Siviwe Dongwana, said their mission was to write a plan and for that plan to be approved by at least 75% of shareholders. “As far as the financing aspect is concerned, that’s not in our purview at all.”
SAA said it had no comment other than those from business rescue professionals.
The Public Enterprises Department said on Tuesday it could not comment given the closed period in the run-up to MTBPS, adding that the finance minister would make the necessary announcements.
That the SAA’s funding requirement of R10.4 billion has been kept up in the air became apparent on Tuesday with the postponement of a meeting with Parliament’s public spending watchdog, the Standing Committee on Public Accounts (Scopa ).
The postponement was requested by the Minister of Public Enterprises, Pravin Gordhan, who wrote:
“This will allow SAA to focus first on securing the necessary funding and implementation of the adopted business rescue plan and ultimately report back to the committee.”
DA MP Alf Lees published the letter along with a statement criticizing the postponement as an attempt to “evade accountability over the government’s morally failed decision to hand over billions to a vain project in the face of rising unemployment and poverty across the country. “
It is understood that the meeting was rescheduled for October 27, but may need to be postponed again, if the MTBPS is delayed for a week.
The postponement of the MTBP 2020 strengthens the rocky path of Mboweni with the adjustment budgets of October. In 2019, the “mini budget” was also postponed for a week amid dire financial statistics.
Given the devastation caused by the hard lockdown on Covid-19, and the continued, albeit eased lockdown, the 2020 numbers are worse.
Officially, unemployment is 42% in the expanded definition that includes those who are too discouraged to even try looking for work. The economy is expected to contract 8.2%, compared to a February budget estimate of 0.9% growth, while debt to gross domestic product is forecast to reach 15.7%.
Already in the Covid-19 June 2020 Emergency Budget, Mboweni sounded the alarms about debt, indicating that 21 cents of each tax rand was spent to cover interest costs on historic debt. That is why departments were ordered to cut R140 billion for Covid-19 measures in the June 2020 Adjustment Budget, and again in the MTBPS.
On the path of social compaction towards the national economic recovery plan, the Presidential Economic Advisory Council has put a monkey wrench in the works. Your 111-page briefing document for the October 9 meeting, viewed by Daily maverickWhile supporting infrastructure spending as a catalyst for economic growth, he bluntly argues that South Africa will not meet its debt reduction aspirations.
“However, it is clear that it is not possible to stabilize the debt in the medium term, despite the commitments of the Minister of Finance in this regard, it will take much longer,” argues the document, which also warns that debt is no longer an option.
It is not clear if the MTBPS will change from previous forecast who sees South Africa’s debt rise to 4 trillion rand, or 81.8% of gross domestic product this financial year. Debt would stabilize 87.4% of the gross domestic product.
Mboweni’s letter on Tuesday asking Parliament to delay the “mini-budget” is indicative of how in this last stage of the MTBPS cycle the rands and cents seem not to be firm yet. Not because of the economic recovery plan, not because of the MTBPS.
And that means the line is no longer holding, a concern amid the ideological and political dispute over South Africa’s economic future. DM
