Balancing budgets to benefit the usual suspects

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The Midterm Budget Policy statement confirmed many of our fears: growth is poor, life is about to get more expensive, and money will be taken from successful SOEs to bail out the problematic. And while some credit goes to the minister for acknowledging the serious issues plaguing the country, no credit is given for his lack of direction or attempt at solving our crisis. 

The 20th Midterm Budget Policy statement  began with the choreographed camaraderie between president Jacob Zuma and deputy president Cyril Ramaphosa. Zuma tilted his neck in giggles after Ramaphosa bit his ear. It felt staged for cameras, to reassure the markets that there was no bad blood between the two of them, despite belonging on different factions towards their December 2017 conference. That this was normal creative chaos of their party internal democracy.

As extended the red overalls of the Economic Freedom Fighters) took over with their own choreography, refusing to listen to who they called a ‘Gupta-paid stooge’, referring to the minister of finance, Malusi Gigaba. They accused him of selling the state companies to Oakbay when he was the minister of Public Enterprise. The Gupta-owned Oakbay was controversially awarded big business deals with state companies like Eskom because of their close relations with Zuma, his son Duduzane and nephew Khulubuse.

The usual fracas of parliamentary sergeants were called to remove refractory EFF leaders when they kept interrupting the house proceedings. The party eventually walked out en mass, refusing to be ‘complicit in corruption’ if they dignified the occasion with their presence. Frankly their performance also felt staged and stale.

Inside, the minister of finance, Gigabites to his fans, got on with things. For my sins, I was seated on the gallery side, looking straight at the balding head of the former finance minister, Trevor Manuel. The huge bald at the centre and thinned greying hair on the side seemed like a correct metaphor for our state.

Minister Gigaba chose to be forthright in the diagnosis of our financial situation, but he fell short in coming up with the cure. The rhetoric was good, but he didn’t give any definitive plans to counteract the problems he had clearly diagnosed. Perhaps it is too much to have expected that from a mini budget whose main duty is to make adjustments on the main budget in February. Also, it was clear that the political hand laid heavy on Gigaba’s ability to manoeuvre things but in my opinion he did well. He gave an impression that he knows exactly what needs to be done, but cannot yet do it, before the ruling party December conference. Let’s recap on his speech.

You can’t remake the world without remaking yourself

The minister began on a high literary note, quoting a poem by the Nigerian/British writer, Ben Okri’s Poetic Fight. The minister says ‘Okri challenges us to remake ourselves in order to remake the world around us.’ The strange thing here is that he speaks as though this change is limited to government and private sector only. As if the culture of our politics does not affect how we govern. The rot of bringing into government, and state companies, incompetent, corrupt and inefficient people is fed by our political culture. Nothing will change without this culture changing itself, because it feeds into the lack of credibility the minister is mired by at the moment.

Further still, the minister misrepresents the facts when he says the NDP (National Development Plan) is answering Okri’s clarion call for our people “to be present at the letsema”. Our people are neither the active participants on the sowing, nor are they in harvesting our economic wealth. Not under the ANC government, and certainly never under the apartheid regime. They’ve been relegated farther on to the apartheid spatial and economic peripheries. The government of the ANC consolidated instead of ending this. They’ve neither had ‘expanding freedom’ nor have the lives of the majority been enhanced by our political freedoms. So, by his own admission, the government has failed to put ‘in place the conditions for people to realize their aspirations for themselves.’ This is at the crux of the  current problem in our country, add to that peddling of perennial plans without their effective implementation. The minister acknowledges as much but fails to propose real alternatives.

The ‘people-centred development’ would have entailed declaring townships and rural areas economic free zones, where company tax is waved, after 94. It would have meant the country’s reserves are now released for the Marshall Plan to address these areas as industrialisation zones, instead of bailing out permanently failing state companies to the tune of R6 billion for their big scale wasteful expenditure and financial mismanagement. South Africa is the only developing country that does not seriously invest on its population as means to expand, not only its tax revenue, but increase its economic growth. Is the only country that does not see economic opportunities where the majority of its population resides. As such our GDP per capita has been declining for two consecutive years now. Largely because the principals of formal economy our government respects is on investor boycott. And the middle class is too indebted to seriously partake on economic consumption. As if that is not enough, our unemployment has reached the all time high, last seen in 2003, of 27.7% (youth unemployment is twice that). And about 30 million SA people live at less than R1 000 per month. Only a non caring government would not regard this as a state of crisis and come up with some form of a Marshall Plan.

Were we optimising and innovating to improve the quality of efficiency of our spending we would not be keeping useless ministers like Lynne Brown, Bathabile Dlamini, Nomvula Nkonyane.  Were we serious about creating jobs, especially youth employment, we would fire those who do not optimise and reveal real implementation of prioritised youth employment on their annual reports. Instead the minister tries to take credit for private initiatives. Worse still, their work he prematurely praises even though it has not really delivered tangible results of one million youth internships they promise.

The good, the bad, and the disasterous

We commend the finance minister for refusing to punish the poor for the mistakes and incompetences of the government by refusing to cut the spending on social rights. We welcome the revised economic growth projections downwards from 1.3% to 0.7%. This is realistic and should tutor the unrealistic NDP projections that are based on fantasy. Because if in 2020 the projection are expected at 1.9% it would be miraculous for Vision 2030 to achieve its 5% projections.

We agree that “economic growth and transformation are mutually reinforcing principles”. That the uneven accrual of economic benefits in our recent past has reinforced our apartheid economic structure and earned us a shameful title of a country with the highest inequalities in the world. The minister does a good job, again, in diagnosing our economic distortions, which also aggravate our social fragmentation. But does not offer real solutions to policy uncertainties and stalemates of BEE except to promise tougher measures against contraveners, something we’ve heard ad nauseam. But we are still not sure about this Broad Based Radical Economic Transformation the minister is talking about, nor does government recent history foster confidence on whether it would be implemented, or is just an election fever ruse.

Government spending, the minister said, is expected to breach the expenditure ceiling by R3.9 billion this year. The expenditure ceilings were introduced in the 2012 Budget to enable government to manage departmental spending levels in the context of a constrained fiscal framework. The minister blamed the state companies, in particular SAA (R10 billion bailout) and Eskom for this situation. And the amount government pays to service its debt is almost the same as it pays for social welfare. Not only is this unsustainable but it also means government soon won’t be able to borrow money from international markets for doing its programmes, like building the country’s infrastructure.

To his credit, the minister was transparent about where the bailout money would come from, perhaps also trying to douse reckless rumours in the media that government was going to use PIC (Public Investment Funds) to bailout SAA. The bailout would be offset mainly by using the contingency reserve funds (R6 billion). And where necessary government is prepared to sell the family silver – Telkom shares (R3.9 billion).

Meantime the budget deficit has jumped from 3.1% of GDP projected in February to 4.3% now. All this, coupled with current political instability within the ANC towards the December will most probably not be enough to ease off the rating agencies from devaluing the country’s economy next month. It might trigger more capital flights; interest rates are also likely to rise, thus increasing the monthly cost on things like home loans and vehicle finance and other debt repayments for ordinary people. We may also find that the rand loses further ground against international currencies, which would increase the price that we pay for import foreign goods into South Africa, including fuel and all. Fuel price hikes are usually followed by food increases.

Much more worrying is the incredible tax revenue shortfall from R0.3bn last year to R50.8bn this financial year. I believe this is an explosion of deliberate tax avoidance. It happens when people feel their tax contributions are being misused by an unpopular government. It does not help for the minister to threaten strident SARS’ law enforcement without addressing the fundamental issue of government corruption perception also.

On a personal level, sitting at the parliamentary gallery, among expensive suits and rather overwhelming perfumed scents, felt more like I had come full circle. It reinforced my decision to rather look in from the window at the pig faces turned human than implicate myself on the dinning tables. I strongly feel, in the last twenty two years the ANC government has been tested and found wanting. Now the writing is on the wall: mene mene tekel upharsin! Naturally, Belshazzar is clueless, giggling to the brink, with his head upturned to the empty ceiling. As for the rest of us who are haunted by Manuel’s balding head – the sophisticated ignorance of the lot who brought us to this mess in the fist, even though they themselves are too proud to admit. To think I once respected this lot. I now kick even their dust from my shoes. SA.


© Spotlight.Africa 2018

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* The opinions expressed here by Spotlight.Africa contributors and editors are their own and not official statements of the Society of Jesus in South Africa or of the Catholic Church unless explicitly stated.

 

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Balancing budgets to benefit the usual suspects