Insular fiscal planning has left the SA fiscus vulnerable to US aid cuts and any chance of covering the funding gap is undermined by inefficient spending by the government.
This is according to the chairs of the committees of parliament that will have to engage and process finance minister Enoch Godongwana’s national budget once it is tabled.
SA’s recent diplomatic fallout with the US has placed pressure on the budget to cover gaps left by a funding cut by the US, leaving hundreds of thousands of South Africans living with HIV vulnerable and jeopardising an estimated 15,000 healthcare jobs in the country.
The tabling of the budget originally set for February was postponed due to a disagreement over Godongwana’s proposal to hike VAT from 15% to 17% to cover a R60bn shortfall. The budget is now set to be tabled on Wednesday.
Standing committee on public accounts chair and Rise Mzansi leader Songezo Zibi said too many global factors were outside the control of the finance minister and the budget would have to be drafted and debated with these factors and their implications taken into account.
“I want to propose to you that one of the things that may possibly happen is that we get kicked out of Agoa [African Growth and Opportunity Act], which means our trade deficit changes, our balance of payments changes, the movement of our currency is different, the exchange rate is different, what we pay for petrol changes, the inflation picture changes,” Zibi said.
“If you consider the Reserve Bank about a month and a half ago, just if you assumed that there were tariffs against Europe, Canada, and so on alone, it would have an effect on the value of the rand. It would have a 0.5% impact on inflation. So let us not sit here and think that we live in a world where everything is constant when it’s not.”
Zibi said it was unlikely that the budget that will be tabled in parliament made provisions for any of the sudden fiscal shocks that SA faced as a result of its fallout with Washington.
“I will say that in the budget that was going to be tabled, I can tell you without fear of contradiction, there is zero room provided for that reality. Zero! And when those events come to pass, we will be back in parliament because the appropriations are unsuitable. We must not have a mindset that is insular and assume that global events have no impact on us. They do,” he said.
He said parliament cannot be impervious to the advice that the National Treasury provides it through the budget review because it is fixated on specific outcomes. He said he believed that there was enough money in the system to cover the aid cuts if it is used properly, but it is not.
Standing committee on appropriations chair and Build One SA leader Mmusi Maimane said it appears untenable to fill this or any other gaps through tax hikes as the public was already heavily taxed, leaving the government with difficult decisions to make.
“I don’t want to sound alarmist and perhaps I want to give credence to the finance ministers that have served this country in the manner that they have with the conditions they’ve had and almost, in some ways, when I think of minister Godongwana, recognise the fact that we are now heading to point of significant crisis.
“That is a reality. We are no longer making choices that are good or bad. We are making choices that are worse or much worse. We are at the peak of taxation. You can’t tax citizens more because, after that point, you start to create tax morality issues.”
Standing committee on finance chair Joe Maswanganyi said the government and the Treasury would have to pay sharper attention than ever to geopolitical instabilities and the threats that they present to the fiscus in an economic reality of competing priorities.
“Every day somebody wakes up and issues an executive order because of the powers that are bestowed on him. You can’t ignore him, because he is leading the biggest economy in the world. Whatever decision he makes has an affect throughout the world.”
He added that decisions of the US administration also presented challenges for SA where they relate to climate change and trade.
TimesLIVE
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