Four is a good number for stability. Good tables have four legs. Solid chairs have four legs. And four is the number of pillars that the governor presented in the midterm budget policy statement, channelling the same sense of security that old furniture provides. With a promising but still shaky government of national unity, sturdy is the message the minister would want to deliver for the GNU's first fiscal plan. To achieve this, each leg in the plan must be clear and firm.
The first pillar speaks to macroeconomic stability. The minister was thin on details over what “assessing the suitability of monetary policy targets” and “improve the levers of macroeconomic policy co-ordination” would mean. This is particularly interesting at a time when there is much chatter around reducing the inflation target band from 3-6% to a number close to 2%. For now, the stability comes from monetary policy defaulting to what we already know, a possible sigh of relief with the latest inflation number at 3.8%, which is promising for a further rate cut in the upcoming monetary policy meeting.
Pillar two provides more clarity and confidence in the fiscal plan. Structural reform is already under way with the fruitful Operation Vulindlela, which has been further expanded for the coming fiscal years. There was a sense of pride in counting the accolades achieved so far with energy supply and the reduction in data costs to highlight just two. More importantly, the minister attributed these achievements to good collaboration with business, encouraging plans to continue accommodative efforts with the private sector.
This collaboration seems to have inspired some of the plans underpinning pillar three: a focus on infrastructure and growth, echoing the sentiments of the recently renewed CEO’s pledge. With the inefficiencies of the economy as a result of dilapidated infrastructure, the focus on infrastructure to drive growth in the country is broadly welcomed. It’s been said that South Africa seems to have transitioned from an energy crisis to a water crisis, creating new challenges for households and productive sectors alike. Hopefully, lessons have been learnt from the energy crisis, which will help us to navigate the logistics and water issues with less pain. Funding infrastructure projects has been a conundrum with our already high debt levels and grey listing.. To solve this, the government will encourage private sector investment with innovative funding models and gain capacity from business to get the work done. It's believable in terms of feasibility.
There is a strong sense that the minister is conscious of the tensions that may come from this budget speech
In the last pillar — building state capacity — the minister outlined a few expenditure increases, in contrast to the commitment to prudent expenditure and debt management that underpinned the whole speech. To be fair, some allocations can be said to be unavoidable: the IEC for the 2026 elections, social relief grants and a much-needed allocation for disaster management in the context of rising climate change and rising environmental hazards. Curiously, while the public sector faces many capacity issues in safety and security, health and education, to list three critical ones, the budget seeks to build state capacity while also introducing early retirement for government employees, which may result in lost skill and experience. There is also a commitment to digitisation that may put more administrative jobs at risk. Unions have already expressed discomfort with the management of the wage bill and this addition may add to tensions between the state and the working class.
There is a strong sense that the minister is conscious of the tensions that may come from this budget speech. Difficult trade-offs need to be made, but are these unfairly weighted on the working class through the wage bill and the grassroots who depend more heavily on public service delivery than do the middle- to high-income households? The minister seems to try to counter this concern by stressing “inclusivity” throughout the speech, mentioning “inclusive growth” eight times in less than an hour. One might ask what the measure of inclusivity is in a heavily business-friendly fiscal plan? The answer might be private sector employment creation. Unemployment is one of the key burning issues in the country at the moment, often linked to other social issues such as crime, poverty and inequality. Should this plan break the county’s curse of jobless growth, it will have strongly countered a key criticism.
• Makhoba is an economist and the lead specialist of research and analytics at Liberty, the insurance and asset management arm of Standard Bank
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