The Democratic Alliance (DA) hoped that Finance Minister, Tito Mboweni would set out a “Resilience Budget” today that would help South Africa brace for the impact of the coming economic crisis.
South Africans watching today’s Emergency Budget speech will be left wondering: “Where is the plan?”
The Minister painted an accurate picture of the horror story of our public finances, and he was right to describe how much worse things will get unless there is a very sharp turnaround soon.
But beyond that, the speech sounded like more of a plea to his own party to support the stalled economic reform agenda, rather than a detailed plan for how to avoid a full-blown sovereign debt crisis. Without this detail, the speech lacked credibility.
Minister Mboweni set out two scenarios: a passive (‘the wide gate”) and an active (“the narrow gate”). On the passive path, government debt-to-GDP will soar to 140% by 2028, all but guaranteeing a debt crisis. On the active path, debt will stabilise at 87% and begin a slow decline.
In short, if the government does not implement far ranging economic reform now, the economic crisis will be far worse than previously thought.
But this government has made no progress on fundamental reform to date.
All available evidence suggests the “passive path” is the more likely path the ANC will follow. If the Minister wanted to convince otherwise, he needed to lay out much more detail on how fiscal discipline will be achieved, debt brought under control, and economic growth spurred.
The Minister did commit to achieving debt stability over the medium term, through “zero based” budgeting. We welcome this commitment, which we called for ahead of the speech, and will hold him to it. But there should be no illusion that “zero-based” budgeting will achieve debt stabilisation. Government lacks the skills and capacity to undertake this enormous job, and it is does not have good quality data on the efficiency of existing spending programmes.
National debt is now projected to reach R4 trillion, or 81.8 per cent of GDP by the end of this fiscal year. That means we will soon spend more on debt than on healthcare or education, and that it will be the biggest single line-item expenditure in the budget.
The DA welcomes the redesign of the Covid-19 loan guarantee scheme, as this will help more businesses access bridging finance and preserve jobs.
Last week we raised our concerns that only 3,5% of the loan scheme had been disbursed so far, because many small businesses could not meet the steep thresholds. Today the Minister confirmed that only 5% has been distributed, underscoring the need for this urgent re-design.
Of major concern is the lack of any detail on the proposed R100bn economic support package for ‘job creation’. This increasingly looks like a gimmick, nothing more than a re-brand of the public employment programme.
This Emergency Budget speech was not the “Resilience Budget” that we had hoped for.
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