Mid-term budget framework will be remembered for what was not said – SRI

24 October 2018

After today’s mid-term budget speech the Solidarity Research Institute (SRI) said that reference to the ongoing land expropriation debate was conspicuously absent from the speech.

“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 SRI said.

According to Mulder 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 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.

Mulder points out that it is encouraging though that no additional funds would be made available to finance yet another increase for public service workers that is higher than inflation. “Given the dire financial situation of most government institutions in South Africa, chances of them being able to absorb the costs associated with higher salaries are slim,” Mulder cautioned.

It was hoped to at least get an indication of what Pres Ramaphosa’s stimulus package might involve. Unfortunately, hopes were dashed and very little that is of tangible significance was announced. What is encouraging, though, is that promises have once again been made to turn state enterprises around. This also comes at a time at which Solidarity had disclosed irregularities at almost every major state enterprise, including at the SAA and at Denel. Bailouts have nevertheless been given to state enterprises yet again, and provision is being made for a steep rise in the petrol price to fund mismanagement at the Road Accident Fund, which is really disturbing,” Mulder said. 

“Despite the complete failure of the pilot projects, as well as economic growth which is significantly lower than needed, the government is going full steam ahead with the National Health Insurance. With an economic growth of 2,3%, which is much lower than the required 5%, there are no discussions on where the funding is going to come from,“ according to Mulder. 

“Minister Mboweni is right – we are indeed at a crossroads. Unfortunately, a continuation of the policy that brought us to this crossroads is the only item which was announced. As long as our government firmly believes that an economy can be regulated into prosperity, we are doomed to a larger debt burden in so far as we wonder why defunct economic policy does not work,” Mulder said.

Issued by Connie Mulder, Head, Solidarity Research Institute, 24 October 2018