Responding to the 2018 medium-term budget policy statement, labour movement Solidarity says “despite the many ideas and plans that are being put together few tangible proposals that could improve the economic situation have been announced”.
Connie Mulder, head of the Solidarity Research Institute (SRI) says the mid-term budget would be remembered for what was not said. “Not a word was said about expropriation without compensation. It seems as if Minister Mboweni (pictured) is of the opinion that it was by pure coincidence that our economy is in a technical recession. Moreover, to list agriculture as one of the main drivers of economic recovery without mentioning one of agriculture’s main threats is simply disconnected from reality,” Mulder said.
“However, what is particularly disconcerting is the fact that our government seems to be losing control over the public sector wage bill and the debt bill – with finance costs at 10,9% year-on-year being the fastest growing item in the budget estimate. Although Minister Mboweni is taking a strong stand when it comes to state debt, he still expects the budget deficit to grow. Tough decisions are much talked about, but hardly any such decisions are being made,” Mulder stressed.
The country’s economic growth has been officially revised down to 0.7% – it was at 1.5% in the Budget tabled in February by one of Mboweni’s predecessors, Malusi Gigaba. Revenue collection is lower than had been forecast. This all means that national debt levels will, again, be higher than projected.
The Media online said “there’s very little tangible good news. That is to be expected. The economy and public finances have been in a poor state for some time. The current level of economic growth is below estimates of population growth, meaning that South Africans will have become poorer per person by the end of the year.
But with debt levels having repeatedly exceeded the levels previous ministers of finance had promised, numerous risks on the horizon and an election looming, there was relatively little room for Mboweni to manoeuvre.
“What Mboweni and National Treasury have tried to do is to keep walking an increasingly thin tight-rope. This involves containing the growth in debt while not reducing government expenditure or increasing taxation to the point where it greatly harms economic growth or South Africans’ well-being,” writes Sean Mfundza Muller, Academic economist at the University of Johannesburg, for The Media Online.
He says unless economic growth improves, the country will have to step off this tightrope. “Either debt must be increased well beyond what had been planned, possibly leading to downgrades, higher borrowing costs and the associated consequences. Or expenditure will be cut and more taxes imposed – leading to immediate negative effects for citizens.”