DUMA GQUBULE: Godongwana’s budget is likely to thwart Ramaphosa’s plans

When analysing a state of the nation address (Sona) it is important to separate the signal from the noise and have a laser focus on what it means for the economy and jobs. Most of what President Cyril Ramaphosa said he would like to happen is irrelevant until it appears in the budget.

For example, the president said we must lift economic growth above 3% per annum. But proof that the plans he announced will not achieve this target will be found in finance minister Enoch Godongwana’s budget on Wednesday, which will have a forecast of an annual average GDP growth rate of 1.7% over the next three years. As always happens, SA will not achieve the Treasury’s forecast.

After delivering 10 Sonas the penny has still not dropped for Ramaphosa that repeating different versions of the same failed policies will not grow the economy and reduce unemployment. The structural reforms, even if fully implemented, will not shift the dial in the context of what will be a R7.9-trillion economy during 2025. And the budget cuts Godongwana will announce will suffocate the economy and cancel the limited effects of the reforms.

During the Sona the president said the government would spend more than R940bn on infrastructure during the next three years. But the same spending was announced during the 2024 and 2023 budgets. This is equivalent to only 3.7% of expected GDP of R25.6bn over the next three years, according to the Treasury’s forecast. This is totally inadequate to reverse the trend of collapsing infrastructure everywhere, and is far below the National Development Plan’s target of public investment of 10% of GDP. The shortfall to achieve this target over the next three years is about R1.6-trillion. 

Ramaphosa said the infrastructure fund had approved 12 blended finance projects worth R38bn over the past year. Lest we forget, he announced the R100bn infrastructure fund during the 2019 Sona. Since then the government has refused to allocate a cent to this imaginary fund, except to pay the salaries of the few people who run it. If the government and its agencies have not put anything into the blender it cannot claim credit for the projects, which would probably have happened anyway. 

The president also said: “We will set up a transformation fund worth R20bn a year over the next five years to fund black-owned and small business enterprises.” The fake news about the R100bn transformation fund has been on steroids, with articles saying the government plans to expropriate these funds from the private sector.

The truth is that the amended BEE codes of 2013, which came into effect in 2015, have had a target of 3% of net profit after tax for enterprise and supplier development (ESD) contributions for a decade. Most large companies are voluntarily implementing ESD projects. 

Therefore, the R100bn is mostly not new money that will be spent on transformation. The fund is about optimising existing ESD contributions and getting companies to invest a portion in third-party fund managers such as the National Empowerment Fund (NEF). But I am old enough to remember that the NEF tried to do something similar under previous CEO Philisiwe Mthethwa.   

The problem is that nobody knows for sure the detail of how companies are implementing ESD and how much money is theoretically available for third-party ESD fund managers. Also, there are so many types of possible monetary and non-monetary ESD contributions. For example, early payments for black suppliers, which is popular with many companies, do not involve cash contributions that can be invested in a fund.

The devil is in the detail and the government talked first without doing the research that is required to find out how much money is available. The fund will not get off the ground without direct allocations from the Treasury, which has not capitalised the NEF since inception in 2004. This government is not serious about transformation. 

• Gqubule is an adviser on economic development and transformation.