It is “imperative” that newly minted finance minister Enoch Godongwana sticks to promises of continued fiscal consolidation, sustainable public debt management and accelerated structural economic reform, in his medium-term budget policy statement (MTBPS) on Thursday, says the DA.
This is notwithstanding the temporary tax windfall from the recent commodities upswing that offered SA’s fiscus a temporary reprieve, the official opposition said on Tuesday.
The party wants a medium-term budget that among other things accelerates SA’s post pandemic recovery — notably through addressing SA’s energy crisis — reduces debt and reins in spending as well as support society’s vulnerable, who have been hit hardest by Covid-19.
Godongwana is expected to unveil an adjustments budget with far better fiscal metrics than those forecast in February. This is thanks largely to a better than expected economic recovery and tax overrun that some analysts say could reach R160bn more than previously forecast, as well as a recent GDP revision that revealed the economy is 11% bigger than previously thought.
But sudden and steep power cuts from embattled power utility Eskom again threaten SA’s painstaking recovery from the pandemic, which saw the economy shrink by a revised 6.4% in 2020 with more than a million jobs shed.
Godongwana is also under political pressure to use the tax overrun to stimulate the economy through extending welfare support, particularly through a basic income grant.
But the DA’s Ashor Sarupen, a member of parliament’s appropriations committee, said the MTBPS should provide a “clear fiscal departure from emergency budgeting implemented to address the short-term effects of the pandemic, towards a resilient fiscal framework that is focused on a balanced budget, economic growth and drivers of job creation”.
To do this, the government must address SA’s “twin challenges of a high debt burden and stubbornly low economic growth rates,” he said, presenting the DA’s expectations for the MTBPS.
The DA’s alternative budget offering is premised on tackling the public sector wage bill. It has proposed cuts to the public service pay that it says will yield R116.7bn over the medium-term expenditure framework.
A further R30.1bn can also be raised by other steps including cuts to VIP blue light security, shutting down the National Youth Development Agency and the long-awaited auctioning of digital spectrum.
The DA advocated continued support for SA’s poorest people, notably higher grant payments to keep up with inflation. It does not, however, support a permanent expansion of the grant system at this stage, said Sarupen.
“Due to increased revenue from the commodity boom, there may be fiscal space to extend the relief grant temporarily,” he said. “However, in the medium to long term SA’s approach should focus on reforms which will boost growth.”
The expansion of social support would, however, be made possible as a dividend of “strong growth and reduced corruption and wasteful expenditure”.
Key to boosting growth is accelerating structural reforms, according to the DA.
“Structural weaknesses in the economy severely constrain our ability to emerge from the devastating effects of the pandemic,” said DA shadow deputy finance minister Dion George. “Without an acceleration in economic growth, the rate of unemployment will spiral upwards and GDP growth will remain tepid at best.”
Eskom and the instability of SA’s power supply, remained the greatest barrier to economic growth, said George.
The DA said SA needs to become independent of Eskom, calling for a “100% solar-power rebate”. It also wants Eskom’s debt paid down to ensure it has a 2:1 asset-to-liability ratio, after which it must be split up into three separate entities — generation, transmission, and distribution — and privatised “as much as is reasonably possible”.
A way to free up fiscal resources to address Eskom’s debt overhang is to rationalise the number of SOEs, George told Business Day.
The DA also does not support any tax increases, and pushed Godongwana to provide finality on e-tolls.
“To avoid further uncertainty on the issue, the minister should take a bold step and ring-fence a portion of the fuel levy to pay for e-tolls,” said George.
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