As the dust settles on the medium-term budget policy statement, there is a kind of muted relief, signalling that the grown-ups have returned to the Treasury.
No new general taxes were imposed. A primary surplus of 0.9% of GDP (about R68bn) has been achieved for the first time in years. Debt is stabilising in the mid-70s as a percentage of GDP. Inflation is low, and markets have rewarded this sobriety: the rand is hovering around R17 to the dollar.
This is all welcome. Necessary in terms of basic housekeeping, but by no means sufficient, and far removed from a developmental agenda.
The budget projects a maximum growth rate of 1.8%. To quote analyst Frans Cronjé, that is not a forecast; it is an obituary. No society with unemployment above 30% has ever reduced joblessness, poverty or inequality at such an aneamic growth rate. A developmental state requires a co-ordinated engine of investment, skills and industrial expansion.
The medium-term budget relies instead on an uncomfortable paradox. Government now consumes 35.5% of national income, almost double the norm for healthy middle-income economies. Yet service delivery is chronically weak, infrastructure is collapsing, and productivity growth is flat — reflecting the fiscal footprint of a capable state with the output of a failing one.
READ IN FULL | Enoch Godongwana’s medium-term budget policy statement
The Treasury has dangled the promise of reform through a greater role for private investors, some devolution to lower tiers of government, and the publication of the state’s supplier and tender database.
Transparency is good, but revelation without remedy won’t cut it. Unless it is followed by enforcement, debarment, breaking supplier cartels and rebuilding procurement capacity, publishing tenders merely documents the rot; it does not treat it.
The ideological positioning is also conflicted. The state is gesturing towards market-friendly reforms, while South Africa’s economic freedom rankings have slid dramatically since 1994. We now sit in the mid-1990s globally, not because the state is too developmental but because it is too politicised, too captured and too incapable of delivering what it promises. The result is the worst of both worlds: a state too large to be efficient and too weak to be transformative.
Meanwhile, core questions remain unanswered. How does this budget dent unemployment in any meaningful way? South Africa does not need more low-wage, high-churn service jobs. It needs scalable, upwardly mobile employment in manufacturing, agro-processing, the care economy and energy industries. That requires a genuine industrial strategy, not blind faith that private investment will spontaneously absorb millions of workers.
How does it reduce the Gini coefficient? A primary surplus does not reduce inequality. It only signals that austerity has worked. The medium-term budget does not confront the structural drivers of inequality: asset concentration, education deficits, spatial exclusion and regressive taxation. Without progressive revenue reform or meaningful redirection of spending towards social investment and human capital, inequality remains untouched.
And how does it repair the damage of past austerity? The statement is largely silent on reversing cuts to public infrastructure, early childhood development, municipal capacity and vocational training. All of these are essential to long-term growth and equity. Stabilising debt is important, but stabilising a stagnant economy is hardly a victory.
The Treasury has produced a credible macroeconomic plan without a microeconomic engine. It has delivered stability, but not strategy. The medium-term budget buys time, but it does not use that time. A genuine developmental trajectory requires a jobs compact that co-ordinates public procurement, skills development and industrial incentives; it requires procurement reform with real enforcement; and it requires progressive, targeted tax reform that tackles asset inequality, not just income smoothing.
Above all, it requires a state that can implement its own policies.
• Cachalia, a businessperson and management consultant, is a former DA MP and shadow minister of public enterprises who previously chaired De Beers Namibia.
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