Phumlani Majozi says the ANC govt is clearly not serious about reducing spending
Reflections on Mboweni’s upcoming budget
18 February 2021
South Africa's Finance Minister, Tito Mboweni, will present his national budget on Wednesday. He'll lay out his budget at a time when the President of the Republic, Cyril Ramaphosa, has admitted that the government has run out of money.
Politicians have finished all the money over the past years, and created the unpleasant economic environment we are now in - where investors choose to go and invest in countries whose economies do better.
Do not only blame politicians for this economic sluggishness. Also blame citizens who have repeatedly voted for people whose policy mission is to tax and spend our society into poverty.
It is intriguing to watch the government's perpetual propensity to spend even when it has run out of funds. These politicians continue to spend on poorly-performing nationalized institutions including SOEs. They still want to go ahead with the implementation of the National Health Insurance (NHI), and they are now exploring universal basic income grants. I don't understand. How do they go on promising such expensive programs when there is no money?
They have said that they want to cut the public sector wage bill – yet they continue to see themselves as an employer and job creator by employing people. Last year, the government set aside R100 billion to employ more people in the public sector. Puzzling.
The fundamental projections are disturbing. The debt is currently at 81.8% and is expected to increase. Deficits are projected to be around 15%. The government debt that these politicians keep accumulating will have to be repaid, and is already being repaid by you and I. Our children will also have to repay it - which is not a good prospect.
The fundamental question is: why do we have a government that is not serious about spending cuts and implementation of market-oriented reform to boost economic growth?
The answer to this question is not sophisticated at all – at least according to us who abhor political correctness. It is because of ideology and politics. I mean, how will the governing party, the African National Congress (ANC), cut spending and privatize state-owned enterprises when it believes in the socialist ideology? Let's be honest, it will not.
How will it reform the labour market to encourage job creation, with unions up in arms against any freeing up of the labour market? These unions are affiliated with the ANC.
The talk of tax increases will not go away this year and next – because the government is clearly not serious about reducing spending. By rhetoric they want to cut spending, but by action they keep on spending and want to spend more in future. It is for this reason that they are not taken seriously and have lost credibility.
The taxes may not be increased in this upcoming budget because the government has seen a surprising increase in revenues over the past months.
And there has already been much opposition to increased taxes. Herman Mashaba, former mayor of Johannesburg is one of prominent South Africans who wrote recently calling for no tax increases. So politics are also amongst the reasons Mboweni is likely to hold back on tax increases.
It is economics 101 that tax increases are not good for the economy. Especially a stagnant economy like South Africa's.
My long-term view is that to fix our finances, the ANC must be removed from power. Because we won’t see our finances being brought to order under the ANC. That's the painful truth.
Fixing our finances must be accompanied by structural reforms. Lesetja Kganyago, governor of the South African Reserve Bank (SARB) has echoed that structural reforms are more key in jump-starting South Africa’s economy. He's right - along with Tito Mboweni to an extent. Though Mboweni disappoints when he starts propagating the idea of a government-owned bank, taxing churches, and whining about white people.
In my column published in July last year, titled “SA won’t be fixed, and the worst is on the way”, I said that the failure of Ramaphosa on economic reform, and the prospects of a David Mabuza presidency in a coalition with Julius Malema of the Economic Freedom Fighters (EFF) makes South Africa's future look bleak.
Our finances will be in a worst position if this coalition becomes a reality. With no money at that time, the coalition will run to the central bank to get it. The repercussions will be disastrous.
We are headed to that disaster - and Mboweni's upcoming budget can't move us away from that direction.
Phumlani M. Majozi is a senior fellow at African Liberty. His website is phumlanimajozi.com Follow him on Twitter: @PhumlaniMMajozi