A budget filled with holes

The political clouds have lifted.

It’s all broad uplands and sunny skies in South Africa at present. President Cyril Ramaphosa’s annual State of the Nation Address was widely welcomed by political prognosticators, as a reassuring commitment to a private-sector driven economy.

This week, Finance Minister Enoch Godongwana’s maiden budget speech was hailed by many as the first tangible puff of wind in Ramaphosa’s sails.

And what’s not to like? The minister had a cool revenue windfall of almost R200 billion, of which R182 billion was a taxation benefit from the unexpected commodity price boom. Of course, it could have been at least double that had the government not choked the mining sector over the past couple of decades. But let’s not be churlish, at least the bonanza is being carefully spent.

Any increase in the public service wage bill will be held below inflation and 45% of the windfall will be used to pay down debt.

The Covid-relief grant of R350 is extended another year but there was no concession on a basic income grant (BIG), which had been lobbied for hard by the ANC’s alliance partners. Instead, there was a surprisingly small corporate tax cut, as well as for individual taxpayers, who will benefit from an inflation-linked adjustment in tax brackets.

Godongwana promised “tough love” for the largely bankrupt state-owned enterprises (SOEs). In future, the entities should be self-sustaining and there would be no more bailouts. Well, umm, except for Eskom (R88 billion and a R25 billion government-guarantee on loans), Denel (R3 billion) and SA Airways (R1.8 billion).

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And the door was left open for SOEs that could show that they are “serious about cost containment”, to get future relief. One of the more enthusiastic responses to the budget came from BizNews editor Alec Hogg.

“After some extremely tough years … South Africa’s luck is indeed turning.”

Generally, however, the response was muted. Some economists think the growth forecasts and, therefore, revenue collection forecasts, on the optimistic side.

There were warnings that there remains a risk of higher permanent spending in terms of public service wages, welfare grants, and SOE reforms. The budget is as revealing in what was left out, as in what it contained. The lack of clarity over BIG is one such omission.

BIG is just one of the cans Ramaphosa keeps kicking down the road. The extension of Covid relief for another year will cost R44 billion – chicken feed in comparison to BIG, which range between R100 billion– R500 billion annually.

The other budgetary lacuna lurks in Godongwana’s projected expenditure on health, which the budget estimates will increase to R259 billion, up from R256 billion in 2021.

The missing phrase here is “National Health Insurance”. Although the NHI Bill is currently wending its way through the public comment stage in parliament – and despite being the most cherished objective of Ramaphosa’s communist and union partners – it was not once mentioned.

As with Sona, we should temper our expectations of what the budget signifies. At best, these are no more than the first signs that the Ramaphosa administration has a rough idea of what has to be done.

Now for the far more difficult part of actually implementing those plans.