EDITORIAL: Godongwana stays the course

Finance minister Enoch Godongwana’s medium-term budget policy statement (MTBPS) represents a firm hand on the tiller at the National Treasury. It will not please everyone — and certainly there are instances where more ambition and courage would have been welcome — but it is important to remember that the minister is operating in a wholly changed political environment.

The news cycle since the election in May has been so fraught that it helps to remember that since the minister tabled the budget in February, SA has undergone a political shake-up that few could have predicted — including National Treasury’s team of public policy experts and economists.

In that context, it is all quite impressive. Broadly, he has managed to steer a sustainable line between the political fringes in the governing coalition, the first time a finance minister has had to do such a thing in the constitutional era. His constituencies are politically diverse and include the populist rump in much of the ANC and its leftist alliance partners in the SA Communist Party and labour alliances, as well as the more liberal and conservative leanings of the DA and the Freedom Front Plus. If you look carefully, you can see all the fingerprints of both the DA and the ANC.

The medium-term budget statement reveals the state of our economy and fiscus, and the numbers in it do not spare our blushes. Indeed, it is encouraging that the budget statement itself presents a blunt assessment of where we are. “It would be imprudent,” the minister wrote in the foreword, “to lightly dismiss the depth of our economic and fiscal problems”. Indeed so, and such plain language is to be welcomed.

The smell left in the room after the Zuma administrations and the Covid-19 crisis manifests itself as five-and-a-quarter-trillion rand of debt, the servicing of which devours more than 21% of revenue. This is a mess we can address with a combination of growth and prudence, both of which have been frustratingly hard to achieve.

There can be no doubt that in the MTBPS the Treasury continues to make all the right noises on growth levers, doubling down on existing plans to create “a competitive energy market” and to “open the freight rail network to private operators”. The statement makes no bones about Transnet’s woeful freight performance, which makes the dearth of planning for the concessioning of its utterly shambolic ports in the statement a somewhat glaring omission.

Nevertheless, much of the narrative in the statement focuses on the Treasury’s desire to direct resources and efforts to investment in projects that will drive growth. These include a promise to fix regulations through which private sector capital can invest in public infrastructure. The Treasury hopes that, with its own allocation to infrastructure projects, this will de-risk private investment into logistics and energy infrastructure.

This is beginning to feel familiar. The state’s ratcheting down of its regulatory hostility towards the private sector is a function of efforts by Treasury, Operation Vulindlela and the presidency, and it is in this that our economy’s salvation is to be found, and should be applauded.

There is also hope to be found amid the generally dreary revenue figures, which have undershot projections by a small degree, specifically in corporate tax receipts, which came in stronger than anticipated as a result of productivity gains occasioned by the pause in load-shedding, and a good contribution from the finance sector. We can hope that corporate performance will eventually translate into improved personal tax receipts.

On prudence, the minister has unsurprisingly left the social wage broadly untouched, though it is to be welcomed that the statement warns that the social relief of distress grant must be properly budgeted for in February and announces a review of various fragmented “active labour market programmes”.

The minister kicked the fiscal rule down the road to a policy document in March 2025. Stabilising debt with a primary surplus will soothe worried investors while he addresses the politics. The forecast narrowing of the budget deficit over the medium term from 4.7% to 3.4% of GDP is also notable and is to be welcomed even if this year’s deficit is higher than hoped for in February.

As with any forecast, there are risks associated with political and geopolitical realities. None is more prescient than the public wage bill. The allocation of R11bn for an early retirement programme for some state workers has the potential to remove older civil service “lifers” whose ideological and productivity baselines are more aligned to the 1990s when they joined the state. This opportunity to professionalise and invigorate the civil service is an excellent development beyond the savings it delivers.