MTBPS: 3 out of 10 from Outa as ex-deputy president gets R6.2 million

Civil action organisation Outa gives the MTBPS a 3 out of 10, as it cuts programmes instead of politicians’ benefits and repeats promises to ‘reconfigure’ departments and entities sometime in the future.

Wanye Duvenage, Outa CEO, also spotted some reasons for concern in the MTBPS and points out that questions loom around payouts for an absent past deputy president and parliament’s rebuild.

One of these is “a controversial R6.227 million “leave gratuity” payment to former deputy president David Mabuza, who was largely missing in action during his term.

“The value of this leave gratuity does not make sense and appears to be a golden handshake. R6.227 million is allocated to the salary of the deputy president for the former deputy president’s leave gratuity payment according to the Presidency vote in the Adjusted Estimates of National Expenditure.”

He adds that parliament’s budget undergoes restructuring, with an overall cut of R215 million. Within this, about R1 billion appears to be redirected to capital expenditure, seemingly the start of Parliament’s reconstruction which is long overdue.

Duvenage says Minister of Finance, Enoch Godongwana, painted a gloomy outlook of the country’s financial position and that is putting it mildly.

“The MTBPS shows us that our government spends more on debt-service costs (up from R340.5 billion to R354.5 billion projected for 2023/2024) than on any other single vote (Social Development is next at R260.9 billion).

“The increase on the debt-service costs in the adjusted budget (about R14 billion) is more than the individual allocations for 27 of the 41 votes in the budget.”

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No specific details about tax and shrinking departments

Duvenage also points out the lack of specific details about increasing tax revenue that leaves citizens and businesses uncertain about the potential impacts on their financial well-being. The repeatedly promised “reconfiguration” of departments and entities also remains vague, leaving us with more questions than answers.

“Glaringly missing are the results of National Treasury’s efficiency reviews and the previously promised introduction of zero-based budgeting, which we would like to see implemented in local government in particular. The MTBPS spending cuts seem devoid of focused efforts for better value, appearing as mere reductions.”

He says this MTBPS highlights how poorly we do in managing and maintaining our infrastructure, along with the lack of accountability for those who trash our rail networks and systems at Transnet and Prasa. “We seem happy to allocate additional funds to fix that which should not have been broken in the first place.”

However, Duvenage also spotted some positive developments in the budget.

“The extension of the Social Relief of Distress Grant which should now be taken as a permanent line item and increased funding for Sars to achieve improved revenue collections from illicit trade and other areas, along with additional funds for provincial governments show promise.”

While Outa was happy that Godongwana addressed the state of water provision, management and wastewater systems, Duvenage is also concerned about the grants the minister specified, based on information elsewhere in the MTBPS documents, such as the Urban Settlements Development Grant to municipalities that faces a cut of R553 million, the Integrated Urban Development Grant that remains unchanged and the Municipal Infrastructure Grant that is cut by a significant R1.173 billion.

“These reductions raise questions about how they address the water and wastewater challenges. The MTBPS shows that the City of Johannesburg, facing water delivery issues, now faces cuts in six out of seven of the grants it receives this year from the national government. These budget changes make us wonder whether the national government genuinely prioritises water and sanitation infrastructure.”

Duvenage says it is encouraging to hear about the introduction of public-private-partnership funding mechanisms for capital expenditure projects on matters such as water and sanitation.

“However, the challenge will be the transparency of these partial privatisation plans for services normally provided by municipalities.”

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No surprises in MTBPS

Jee-A van der Linde, senior economist at economic research group, Oxford Economics Africa, says the outcome of the MTBPS was broadly in line with its expectations and although the finance minister delivered a gloomy speech, markets might feel somewhat relieved that there were no major surprises.

“The finance minister shot down Transnet’s funding request but noted that the National Treasury is working with Transnet and the department of public enterprises to ensure that Transnet can meet its immediate debt obligations.”

“That said, the bar for the MTBPS was set low to begin with and the deterioration in state finances does not come as a surprise. The South African government did not use the pandemic commodity price windfall to effectively build up fiscal buffers.”

Van der Linde says unfavourable revisions to GDP growth, the weak fiscal balance and high public debt pose significant downside risks and warrant credit rating downgrades. However, if government can demonstrate that its restructuring efforts to boost economic growth and turn around beleaguered parastatals are yielding results, then rating agencies might see that as a positive.

“However, reform changes are coming through too slowly. The sustained increase in South Africa’s gross government debt together with the tightening of financial conditions mean that financing risks have risen, with higher loan redemptions forthcoming over the Medium Term Expenditure Framework.”

He emphasises the group will continue to maintain that South Africa will not record a primary budget surplus in 2023/2024, with government debt as a proportion of GDP expected to breach the 80% echelon by end 2025.

“External conditions are not in South Africa’s favour at the moment, with political uncertainty set to endure ahead of next year’s general elections.”

Busi Mavuso, CEO of Business Leadership South Africa (BLSA), commends the minister for the realism shown in his speech.

“The minister outlined the numerous challenges and acknowledged the risks. Among those is the weak outlook for the global economy, which is not supportive for South Africa’s growth prospects. Also, in the face of a strong campaign for him to spend more and allow debt to rise, he held the line firmly and highlighted the need for fiscal consolidation.”