MTBPS: Godongwana unable to act decisively and fails to stop the cadre gravy train

1 November 2023

The finance minister's sense of fiscal responsibility is welcome, but wholly insufficient given the scale of the crisis. With deeply vested interests, his colleagues do not want the gravy train to stop.

Austerity is good: More money needs to be inside the economy, not outside it in political hands. A state with less money is a state that will interfere less in the economy and allow it to grow.

Government has long bitten off more than it can chew – using an expanded mandate to collect more revenue. Less money in government hands means less corruption and more room for citizens to prosper, and it is highly concerning that billions are looted each year.

The Minister of Finance, Enoch Godonwana, delivered the Medium-Term Budget Policy Statement (MTPBS) today. It is concerning that National Treasury’s deficit forecasts were revised higher than the February estimates, adding to a 15-year long trend of expenditure overshoots. Government continues to spend above its means in an unproductive and highly consumptive way.

While the Free Market Foundation (FMF) welcomes Minister Godongwana’s conservative intent, the budget includes few hard commitments to meaningfully cut spending. We urge National Treasury to take the steps needed to mitigate the current economic crisis that South Africans are facing.

'Our economic situation demands decisive action. The current gross deficit is R54.7 billion higher than forecast in the February Budget, and could well be much higher if current budget trends are realised. Taxpayers simply cannot afford the extent of government spending. Serious cuts need to be made urgently', says David Ansara, CEO of the FMF.

The Minister's intimations of ‘fiscal responsibility’ are welcome, but wholly insufficient given the scale of the crisis. His colleagues do not want the gravy train to stop, and as a result, he was unable to announce anything substantive that would introduce real fiscal responsibility into the public service. He proposes big cuts in future years, but we have heard this narrative before. Godongwana’s promises will not be binding on whoever follows him as the next Finance Minister.

Sovereign borrowing is way out of hand. In the 2023, 2024 and 2025 fiscal years, government will borrow as much as R1,747 trillion, enough to buy 920,000 brand new BMW X3s.

The claim that government has taken concrete steps to support growth is false. There are no 'concrete steps' in the MTBPS or in government's policy agenda that will indeed support growth, with the state among the largest employers in the economy while stifling investment and growth in the real economy. Growth can only come on the back of widespread liberalisation and deregulation – especially in the overregulated labour market – none of which is contemplated.

The unconcretised idea that government will allow municipalities to generate electricity themselves for additional revenue is a welcome one, but one that is too abstract at this juncture and difficult given the lack of technical capacity in state institutions. Eskom has shown remarkable resistance to its loss of dominance in the past, even ignoring President Ramaphosa's July 2022 instruction to develop a mechanism for households and businesses to sell excess power to the grid.

It’s time to take action. The FMF urges government to start limiting state spending by cutting any Cabinet portfolio and Cabinet department that is not clearly required by the Constitution or essential to the functioning of the economy. We also call on government to drop financially unsustainable plans like National Health Insurance or the Basic Income Grant.

'More money needs to be inside the economy, not outside it in political hands. A state with less money is a state that will interfere less in the economy and allow it to grow. The Minister's sombre tone unfortunately reveals that he remains subscribed to the harmful and fallacious notion of a 'developmental state'', Ansara concluded.

Issued by Anneke Burns, FMF Publicist, 1 November 2023