Tito Mboweni. Tito Mboweni. Tito Mboweni. Leading off the bat with a pros all of hard facts to match the president’s poetic prose. Tax revenue is down 15,4%, but VAT rebates jumped to R41-billion. So less money is coming into government coffers, but there is an extra couple of billion heading back into the economy. That’s kind of the story of his maiden budget speech: give a little, take a little and the national debt will stabilize near 60% of our gross domestic product by 2023. Bloody hell.
The big question, however, was what the minister was going to say/do about Eskom. R23-billion per year over the next three years. What is encouraging, though, is the minister’s insistence that the state-owned enterprises need to dig themselves out of the debt holes. It’s an especially difficult time for the ANC-aligned finance portfolio because the stability of the tripartite alliance hangs in the balance.
Pulling a Thatcher, as Mmusi Maimane suggested in his immediate retort (the Mmus actually said that SOEs be sold), would cause riots and violence and harm the ruling party at the polls. But the plan to unbundle Eskom into three entities is forging ahead with Tito announcing the appointment of a chief reorganizing officer at the power utility.
On the consumer front there are the obvious sin tax increases hitting cigarettes (R1,14), beer (12c), wine (22c) and liqour (R4,54), but it’s the fuel levy increases (29c for petrol and 30c for diesel) will cut the deepest as these costs will be passed directly to the consumer. Diesel, specifically, is the driving force behind retail distribution and retailers are already under all sorts of other pressures. Your grocery basket will cost more soon.
Our current budget shortfall is around R243-billion, which the minister equated to a loan rate of R1,2-billion per day (in a 5-day week) and the interest owed in the coming year equals R209-billion, or, to use his logic, R1-billion per day. One of the ways Tito is targeting reduction in public spending is reducing the public wage bill by some R27-billion over three years. This will be done by offering early retirement and scrapping increases. My read is that the cabinet size will be drastically reduced with the next government.
“Highlights“ that I can spot are increased spending on healthcare and education. Community healthcare worker wages will be upped to R3500 (a R1-billion additional investment from government), another billion is being spent on interns and R2,8-billion goes to a new Human Resources grant in order to increase the number of doctors and nurses. Education spending adds R2,8-billion to the school infrastructure backlogs grant to realise Cyril’s dream of replacing pit latrines with toilets. And R30-billion goes towards building new schools and maintaining infrastructure.
Free tertiary education for 2,8 million deserving students will come from a R111,2-billion government investment. South Africa’s social grants takes a hefty R567-billion from the budget with increases to child support grants (up to R430 in October), foster care grants (up R40 to R1000) and veterans, old age and disability dependency grants increase by R80.
Hidden from view here are the carbon taxes which come into effect when the Carbon Tax Bill comes into effect on 1 June and possible Eskom tariff increases. Both will further bleed the consumer pocket and erode the limited trust in the government’s economic planning.
Tito spoke the hard truths and there is no easy way out except by going through this difficult period. South Africa is teetering on the brink of economic decline, brought on by almost a decade of looting by the Zuma-led administration. Thankfully SARS is getting a new commissioner and given reinstated abilities to go after large businesses and off-shore funds owed to the treasury. The public prosecutor is getting some muscle as well to go get back some of the stolen money.
But that isn’t enough. We need reform in the SOE sector and will have to face the inevitability of cutting off the dead wood. Tito alluded to it by asking for suggestions in dealing with these enterprises. The ANC will face significant pushback from It’s long-standing allies. Julius and the EFF will use this to steal some votes from the misinformed. Mmusi and the DA, however, are wedded to the private sector and will only turn to the the broad support base (working class) if the ANC moves into that playing field. It’s a weird moment where all three front-running parties represent the full economic spectrum.