Budget 2021: Fiscal discipline being used as excuse for abdication of duties – Economist

The cost-containment measures announced by finance minister Tito Mboweni was unprecedented and worse even than in 1998, Patrick Bond, according to professor at the University of the Western Cape School of Government.

Bond said the oft-touted R500 billion fiscal stimulus has now clearly been unveiled as a fib and that from R1.486 trillion in 2019-20, the 2020-21 spending (on non-interest items) would have been R1.535 billion had it simply kept up with inflation of 3.3% this past year.

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Bond said the actual spending was R1.571 trillion, which he said was a real increase of just R36 billion, not R500 billion.

He said the idea that as part of that supposed stimulus, bank loan guarantees to businesses worth R200 billion would be taken up has already been shown as a fanciful dream, since only around R20 billion appeared to have been lent under this scheme.

“In other words, South Africa’s Treasury has done next to nothing to provide net fiscal support to the citizenry during the worst period in memory, as at least 1.4 million people lost their income. It is a shameful abdication of duties, making this government one of the most irresponsible on earth, all in the name of fiscal discipline,” Bond charged.

“To add insult to injury this comes with a corporate tax cut to 27% – recall that in 1992 the rate was 52% – and with severe cuts to municipalities, social services and housing, universities and the health system,” he said.

The finance minister has said that one of his reasons for hope was that the 2021 Budget explicitly supported economic transformation and job creation.

“Our R6.2 trillion spending envelope over the Medium-Term Expenditure Framework gives expression to the Economic Reconstruction and Recovery Plan. This is not an austerity Budget. Our fastest-growing area of spending is our investment in the future-capital payments,” Mboweni said.