Mboweni faces tough balancing act to save lives and the economy

Finance Minister Tito Mboweni will have to rob Peter to pay Paul as he juggles numbers to strike a balance between two emergencies: the fight against Covid-19 and saving an economy already on the edge.

Experts said Mboweni have a difficult task as he was facing an economy on the brink, accompanied by rising unemployment and a virus that continues to wreak havoc in terms of lives lost daily and the rapid rate of infection.

They said the minister has no option but to take the bull by the horns to get the country out of the socio-economic quagmire brought about by the disease.

Mboweni is expected to table an Emergency Budget toward the end of next month to address the fight against the continuing spread of the coronavirus, including relief measures.

South Africa’s virus infections could soon hit 20,000, with deaths already past the 260 mark.

However, the country was seen as doing well, compared to developed countries such as the US and European nations.

The minister is also under tremendous pressure from public sector unions to reverse his decision not to implement increases for civil servants this year.

Political economy analyst Daniel Silke said Mboweni needed to identify how much of the R500 billion package announced by President Cyril Ramaphosa would come from lenders such as the World Bank, the International Monetary Fund and local agencies.

He must balance the rest of the plan utilising the R100 billion that he must shift from various government departments.

Silke said the minister would be compelled to put infrastructure build on hold and shift those funds to health to address the pandemic. He needed to strike the right balance between funding the fight against the virus and ensuring the economy remained viable now and beyond Covid-19.

“That means Mboweni might consider introducing wealth tax to assist funding healthcare.

“It can be a once-off ‘Covid-19 tax’ taken from wealthy individuals.

“One thing for sure is that there is no room for more VAT increases,” Silke said.

An estimated R250 billion is likely to be lost in sin tax this year, due to the lockdown prohibition on sales of tobacco products and alcohol. The government would also fall short on personal tax collection due to lockdown-related job losses and employees earning lower-than-usual salaries and wages.

The Unemployment Insurance Fund allocation set aside by the government to compensate employees affected by the lockdown would not cover what could have been earned and taxed had there been no lockdown.

The government indicated that lost earnings would not be covered in full by its benevolent gestures.

“One has to tread carefully when dealing with the question of tax, it’s a sensitive matter,” Silke said.

Political analyst professor Tinyiko Maluleke cautioned against the government’s tendency to only bail out big business during an economic crisis, which, he said, was a global practice.

“There is a tendency to bail out big business on the assumption that they create jobs.

“It has to be a much more comprehensive bailout that considers the four million unemployed who are not at school, and the crisis that Covid-19 created for all the other sectors of the economy and the people,” Maluleke said.

The things that the minister had previously ignored pertaining to the poorest of the poor would have to be factored in in his emergency budget next month, he said.

At the same time, Mboweni should use the comprehensive funding approach as a springboard for a new model of financing public spending.

Silke said for the future Mboweni must look at how the economy could recover beyond Covid-19.

“There is a need for major policy reforms. The minister needs to continue with the kind of reforms that would turn the economy around.

“One looks for commitment by the minister to the structural reforms he talked about in February during his budget speech,” Silke said.

– ericn@citizen.co.za

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