President Cyril Ramaphosa will enter familiar territory when he addresses parliament and the nation on Thursday evening against a backdrop of low expectations.
A few political hiccups in the government of national unity and the deaths of South African soldiers in the Democratic Republic of Congo will make the atmosphere a little tense — though nothing he’s not used to. His ability to deliver credible promises has been limited by a doddering economy that has little wiggle room on the government budget side.
There is no money to do anything amazing. The government faces two options: Cut existing programmes or borrow more to introduce new ones.
Finance minister Enoch Godongwana has been preaching the gospel of fiscal consolidation, which shows there’s no appetite for crazy debt accumulation. But there’s a snag: The Bureau of Economic Research (BER) on Friday warned that government spending may have to be increased to accommodate public sector wages and social grants spending.
The government has tabled a 5.5% wage offer for public sector workers (above its budgeted increase). This has yet to be finalised and may put pressure on the Treasury.
Also, the high court has ruled that the “temporary” social relief of distress (SRD) grant is a permanent feature of South Africa’s social assistance regime. “While not accounted for in the Treasury’s long-term forecasts (as it insists it would need a sustainable income source to fund it), we have always assumed that some form of the SRD would become permanent,” said the BER in a note.
However, there could be big implications from the court’s ruling, including that the affordability of the grant (from a fiscal perspective) cannot be a reason to exclude people who have insufficient means to support themselves. This would increase the number of qualifying recipients, from the 10.5m budgeted for, to 18.3m — with an accompanying increase of about R35bn a year to fund that (based on R370 a month for each recipient).
These issues will make things a little edgy in Pretoria over the next two weeks, and are likely giving Ramaphosa and Godongwana sleepless nights. What we don't know is how much the finance minister and his boss are prepared to rock the cabinet boat — by moving department allocations around, and shifting money from ineffective spending areas to those that can ignite the economy.
Evidence suggests government spending does not bring much in return. That means the government could make more of an impact by bringing in the private sector to help with some of their new projects.
He cannot do much for the defence force, as money for its revival simply doesn’t exist without major cuts elsewhere
All eyes will be on Ramaphosa in terms of the revival of Transnet, which has become the “new Eskom” in terms of its stranglehold on the economy. Transnet spends about R1bn a month servicing debt; it is dangling over a debt cliff, with its operations suffocated by a lack of operational funds.
Presidents do not give away much detail about fiscal moves, which are usually left to the finance minister to announce two weeks later in the budget announcement. However, for the speech to have some bones, the president often steals a bit of the finance minister’s thunder by making one or two important announcements.
Investors will be closely watching the National Health Insurance and what Ramaphosa is planning to do about it. He has proven unpredictable recently, as shown by his assenting to the Expropriation Bill, which has roiled some of his GNU partners.
He will need to tread carefully and not rock the boat too much, as harmony in the coalition is important for this administration’s success. The International Monetary Fund this week urged South Africa to speed up and implement its electricity and logistics reforms. It also indicated that meeting South Africa’s climate goals will require further efforts to increase effective carbon taxation and accelerate the rollout of renewable energy.
Ramaphosa has an opportunity to address the nation on his plans to deal with decaying military equipment, as well as the recent deaths of South African soldiers in the DRC. He cannot do much for the defence force, however, as money for its revival simply doesn’t exist without major cuts elsewhere.
The reality of Donald Trump’s second term has hit home fast, with the cancellation of foreign aid affecting South Africa’s HIV/Aids programmes. Trump promises to be unplayable in many aspects of public policy, making life difficult for central bankers and those who manage fiscal policy.
• Mkokeli is lead partner at public affairs consultancy Mkokeli Advisory.
For opinion and analysis consideration, e-mail Opinions@timeslive.co.za
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