Medium-Term Development Plan: No borrowing limit but 3% economic growth

The government of national unity does not want a borrowing limit for government in the form of a fiscal rule but wants 3% economic growth, improved state capacity and less poverty as stipulated in the Medium-Term Development Plan.

After President Cyril Ramaphosa also referred to the Medium-Term Development Plan in his State of the Nation Address (Sona) on Thursday night, minister in the presidency for planning, monitoring and evaluation, Maropene Ramokgopa, briefed the media on Friday morning on progress to finalise it.

The Medium-Term Development Plan integrates the Statement of Intent of the government of national unity’s (GNU) and the National Development Plan (NDP) into government’s priorities for the next five years.

The Medium-Term Development Plan has three main aims: to generate economic growth of 3%, improve state capacity and reduce poverty. The fiscal rule and National Health Insurance (NHI) targets are the main issues for the ANC and DA.

Various entities, including the International Monetary Fund (IMF) have suggested that National Treasury adopt a fiscal rule to control government’s debt levels. This would mean that parliament sets limits on borrowing and any borrowing above this limit would be illegal.

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Medium-Term Development Plan: not much appetite for fiscal rule

While Treasury said last year it would investigate implementing a fiscal rule, and the DA wanted it, Finance Minister Enoch Godongwana did not seem too interested. Ramokgopa, who is the custodian of the Medium-Term Development Plan, said in her briefing that a fiscal rule would be risky as it would prevent government from borrowing in an emergency.

“We are not going to adopt a fiscal rule because that will create challenges for Treasury to do what it must do. Given the environment that we operate in, some challenges might not be things that we can plan for, such as Covid-19. We might introduce something that prohibits Treasury from interventions they must make.”

She said that after the discussion, all the parties in the GNU agreed that the fiscal rule would not be included in the five-year Medium-Term Development Plan. She pointed out that Godongwana believes that Treasury’s policy of targeting a primary budget surplus performs the same function as a fiscal rule.

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A compromise on the NHI targets?

Ramokgopa then turned to the discussions at the lekgotla where a compromise on the NHI targets was reached. The initial draft of the Medium-Term Development Plan referred to phasing out private insurance coverage for services covered by the NHI, but this was removed in the draft agreed on.

“The president explained in his speech last night that what will happen this year on the NHI is the preparatory work to establish ministerial advisory committees on NHI. The committees will focus on health technologies, healthcare benefits and an accreditation framework for healthcare service providers.”

She confirmed that medical aid schemes would be included in these proceedings.

Due to disagreements at the lekgotla over the NHI, Ramokgopa engaged on the sidelines with DA leader John Steenhuisen to find common ground, but health minister Dr Aaron Motsoaledi told News24 on Thursday that he was not party to the discussion and had no idea of what was agreed on.

However, Ramokgopa said negotiating was necessary but did not entail calling a broad consultative meeting of everyone.

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Medium-Term Development Plan’s compromise on NHI

“The Department of Planning Monitoring and Evaluation is the lead in ensuring one government plan. We went through several processes, and where there was not necessarily an agreement, we had to negotiate. We did not call everyone together, but we spoke to different parties and stakeholders involved.”

Ramokgopa also pointed out that the third important outcome of the Medium-Term Development Plan process was an agreement to review “the mechanisms around the industrial policy and localisation to assess which ones are most impactful.” The DA does not think some of the sector Master Plans benefit consumers or the economy.

The Medium-Term Development Plan covers all government areas and sets out clear targets for the five years of the GNU. Cabinet has not approved the final document yet, but is expected to adopt it by the end of the month before it is published for public information.