Business Unity SA (Busa) has welcomed finance minister Enoch Godongwana’s medium-term budget policy statement (MTBPS) and commended him for his prudency in managing scarce financial resources.
The business organisation was particularly pleased that no new allocations had been made to state-owned enterprises (SOEs).
“We believe this should lend urgency to a hard discussion on the roles and mandates of SOEs ... and possible closure of those that add no economic or social value,” Busa CEO Cas Coovadia said in a statement.
“This gives government the space to urgently institute the necessary structural economic reforms that will attract investment and enable us to grow our economy. That is the only way forward.”
Godongwana announced that SOEs that have relied on government bailouts to remain afloat will not be allocated any additional funding over the next three years as the government moves to rein in public spending.
Some of SA’s crucial SOEs have been hollowed out by years of corruption and mismanagement. They include power utility Eskom, which is battling a debt of about R400bn and has been struggling to keep the lights on due to generation capacity challenges. Ratings agencies have described Eskom as the single biggest risk to the economy.
Coovadia said Busa noted that the minister’s mini-budget also addressed the plight of the poor, with Godongwana allocating an additional R26.7bn to extend the social relief of distress grant until March 2022.
Busa felt this was necessary to relieve poverty and enable people to put food on the table. “However, this is not sustainable and the most sustainable way to address poverty is to create jobs and enable people to accumulate assets,” said Coovadia.
Business Leadership SA (BLSA) congratulated Godongwana for delivering a “solid budget” but cautioned that the challenges ahead were formidable.
“BLSA and its members are already involved in supporting government to assist with growth-enhancing reforms. As the minister noted, economic growth is the only sustainable way to steady government’s finances,” the business organisation said in a statement.
North West University Business School economist Raymond Parsons said Godongwana has had to walk a fine line.
“There are a number of uncertainties that still need to be resolved. The Eskom load-shedding also continues to loom large over SA’s economic performance,” said Parsons.
DA shadow deputy finance minister Dion George said while it welcomed Godongwana’s commitments to not make additional allocations to SOEs, he fell short of the party’s key expectations to shore up the economy.
The DA’s expectations included accelerating the post-pandemic economic recovery, reducing gross national debt and managing expenditure, supporting the vulnerable and committing to no tax increases, among others.
“The MTBPS only anticipates stabilising the debt to GDP ratio at 78.1% by 2026. It remains clear that the pathway to stable public finances remains blocked by government’s hopelessly inadequate economic policy,” said George.
George said he was not happy that the minister did not provide any additional detail on what steps will be taken to relieve the power crisis.
“We would have expected the minister to demonstrate some urgency on ensuring energy stability to support business that is heavily dependent on the power supply,” he said.
“The MTBPS is entirely driven by the short-term commodities boom and there is no meaningful plan to sustainably grow the economy beyond just being a passive recipient of favourable global conditions.”
Cosatu national spokesperson Sizwe Pamla said the labour federation was disappointed by a “tepid and uninspiring” MTBPS. He said it was another missed opportunity to put the country on a sustainable growth trajectory.
The medium-term budget provided “few new ideas or interventions” to grow an economy that is in its deepest recession as there were no plans to rebuild SOEs or fix dysfunctional municipalities, he said.
“No new allocations were provided to stimulate a stagnant economy, and no new measures were provided to increase badly needed state revenue or to deal with the ballooning levels of corruption and wasteful expenditure.”
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