Finance Minister Enoch Godongwana threw down the gauntlet to his critics this weekend, holding a tough line on public finances ahead of his presentation of the medium-term budget policy statement on Wednesday.
Godongwana has come under fire from civil society organisations and from within the ANC for his increasingly outspoken concern regarding the shrinking fiscal space presented by weak growth, ballooning public sector wages, and curtailed revenue because of poor performances at state-owned electricity and logistics giants Eskom and Transnet.
“They call me Mr Austerity,” he said. “I don’t like it, but I can live with it.”
Speaking at the annual Kgalema Motlanthe Foundation Inclusive Growth Summit in the Drakensberg on Friday evening and over the weekend, Godongwana said that he was unable to speak about the budget because he was in a closed period. However, he said he was able to describe “my pain”.
Godongwana characterised the challenges facing public finances as being a function of weak collections and spiralling costs, saying he would need to “bump up” borrowing to mitigate against budget cuts. However, he warned that R4.3bn public debt was “massive”, decrying the vanishing fiscal space as debt servicing costs rise in an environment of weak growth. He warned that there are several large redemptions looming “and if we don’t redeem we run out of cash by the end of March”. Eighteen cents in every rand collected is spent on servicing debt, he said.
Spiralling debt servicing costs vex the minister. “The American ambassador accused us of loading arms onto the Lady R. It now costs more to borrow and revenue is falling, which means I don’t have money."
"We have to curb that runaway expenditure and debt. The problem with debt is not its size - it is the capacity of the economy to service it. In this environment, our capacity to service is constrained.”
Godongwana spared no blushes in a speech designed to hit back at his critics. Earlier this month, Business Day reported that more than 100 academics, economists, professionals, and civil society organisations had signed an open letter to President Cyril Ramaphosa and Godongwana calling for a halt to budget cuts.
“National Treasury’s instruction to government entities to immediately institute severe budget cuts is misguided, dangerous to our economy and wellbeing, and not supported by robust evidence,” the letter says. “A sense of panic is being created in order to force through these rushed, chaotic and indiscriminate cuts,” the letter said.
Sources in the ANC told Business Day this weekend the minster was also grilled in a National Executive Committee meeting of the party last week, as the party faces flagging electoral support ahead of a general election next year.
Godongwana conceded that the National Treasury’s growth forecast in the budget presented in February as being “a bit optimistic” in hindsight. “We did not foresee the intensity of loadshedding,” he said, and added that the “rocky road back from the pandemic” had hammered investment, compounded by Transnet Freight Rail’s inability to get exports to the ports.
“The coal line is back to 1996 levels, there are retrenchments. There are serious implications for this.”
Godongwana slammed inefficiencies in the state sector, describing the lack of capacity in the state as “not just technical, but also political”. He said “corruption leakages” in the form of ghost workers and dysfunctional procurement systems heaped wastefulness on top of fiscal problems, and the infiltration of organised criminal networks into construction projects was serious. “People come and demand 30%. What kind of country is that?” he asked.
“We must professionalise the civil service and introduce a proper digital procurement system. It is unacceptable that we have been battling power cuts for 15 years.” On the issue of wages, he described a conversation with NUMSA secretary-general Irvin Jim. “I phoned him, and I asked him how he can ask for 15%. How does that work? It’s a poor company!”
Concluding, Godongwana had a final swipe at his political critics, saying the cuts in the budget would be “less than the under-expenditure” for the year, which stood at just under R29bn for 2022/23. He promised “something to smile about” on Wednesday.
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