STATEMENT BY BRETT HERRON, GOOD SECRETARY-GENERAL
24 February 2021
#BUDGET2021: MIXED BAG OF HOPE AND DESPAIR
Vaccinating the nation is the single most important path to economic recovery. GOOD therefore welcomes the allocation of R10bn and the creation of a reserve for future procurement for the vaccination drive, without the need for tax increases that nobody can afford.
The total vaccine bill is estimated at between R10bn and R24b. Whether the R10bn allocation, over two years, will be sufficient will depend on the cost of the vaccines.
The budget will fail South Africans, and the economic recovery plan, if the funding allocation is not sufficient to achieve the vaccination objectives.
Most disappointing in this year’s budget delivered by Minister of Finance Tito Mboweni today were the failures to plan for a Basic Income Grant or to draw a line in the sand on future bailouts to bleeding state-owned enterprises including Eskom and SAA.
South Africa has difficult choices to make and trade-offs are unavoidable. On balance, GOOD believes Mboweni’s budget largely succeeds in navigating the very fine line between bare economic survival and the fiscal cliff.
Covid
The pandemic is the greatest risk to our country’s ability to meets its obligations to improve the lives of its citizens and address inequality.
The non-negotiable in the budget was the allocation of sufficient funding in the budget for the roll out of a vaccination programme that will see 67% of all adults vaccinated in this calendar year.
It is now up to all South Africans to maintain their Covid disciplines and do their best to mitigate the necessity for further shutdowns and economic disruptions.
Ters and BIG
The temporary social relief grant of R350 per month was introduced to alleviate financial hardship wrought by Covid-19.
The grant was due to expire next month, and GOOD welcomes its extension to the end of April 2021. But this is insufficient. It is inhumane to end this relief, and will create unimaginable hardship.
In economies that are unable to produce sufficient number of jobs for its people, the state has obligations to provide some social security. No person should be expected to live without access to any income.
The Basic Income Grant has been studied, extensively, and these studies have concluded that such a grant will reduce extreme poverty by as much as 70% – and that our country can afford it. Indeed, we cannot afford not to introduce a BIG.
We are disappointed that the Minister made no mention of a BIG – if we are doing zero-based budgeting then the opportunity exists to find the funds to implement this.
Electricity
The prospects of growing the economy, and implementing a massive job creating infrastructure programme, is doomed to fail if our electricity supply remains erratic.
We have been bouncing in and out of load-shedding since about 2008 and it is time to bring an end to this instability and uncertainty. Investment in our country and infrastructure programme will not be an attractive prospect without stability and certainty.
There is immediate renewable and clean energy capacity available from independent power producers which must be procured urgently and fed into the grid. Load-shedding must end.
The Minister’s failure to address the debilitating role that ESKOM plays in undermining our progress was among the greatest disappointments in the budget.
Debt reduction
Last year the Minister made a number of commitments to bring financial stability and ultimately prosperity to our country. He made it clear that we are spending way too much money on servicing our debt and that this was crippling our finances and our prospects.
In the Special Adjustment Budget delivered in June 2020 the Minister committed to:
• Stabilisation of debt at no more than 87.4% of GDP in 2023/24; and
• Achieving a primary surplus by 2023/24.
South Africa’s investors, employers, and international ratings agencies needed to hear that this plan was being implemented and that these objectives have not been abandoned.
We are disappointed that these targets have been revised to a primary surplus in 2024/25 and debt being stabilised at 88.9% in 2025/26.
We are relieved to hear that our finances are not as dire as predicted in October 2020 but remain concerned about our overwhelming debt commitments.
We do however welcome the continued commitment to reducing debt as well as the clear statement that debt costs are holding us back.
Reducing costs
The public service wage bill was identified by the Minister as a significant burden on our fiscus. We welcome the Minister’s continued committed to a just and sustainable public compensation regime.
The focus on reducing costs cannot be about the public wage bill only. We need to eliminate corruption, leakage, incompetence and wastage.
State-Owned Enterprises
South Africans are fatigued by the endless debate about under-performing and mal-performing SOEs.
Our fiscus has made a number of commitments to support SOEs like SAA and ESKOM.
We wanted to hear the Minister say that there would be no more bailouts for SOEs, and that SOEs need to find financial viability by their trading. If their trading does not contribute to our economic development it makes no sense to continue flushing money down the drain.
We are disappointed that the Minister failed to draw a line in the sand when it comes to SOEs like SAA. We need to finalise the SAA debacle.
Infrastructure
The shift of priority from spending on consumption to spending on infrastructure is welcome. Infrastructure is the backbone or flywheel of our economic growth plan.
Investing in infrastructure as a tool for economic growth and job creation is sensible. For every job created on a construction site at least seven jobs are created in the supply chain. We must pursue an infrastructure led economic growth plan.
Infrastructure also creates the environment the private sector and investors look for when choosing where to invest or set up shop.
South Africa’s economic recovery and job creation plan cannot government’s plan, alone. The private sector has important obligations, too. But the private sector seeks policy certainty and the infrastructure to trade, provide their services and move their goods. It needs transport and digital infrastructure.
We welcome the announcement of R792 billion in expanding infrastructure.
Zero-based budgeting
Last year the Minister committed the country to zero-based budgeting. This would be the starting point for making hard choices about where our priorities lie, and will enable us to eliminate waste and fund services that are urgently needed.
We welcome the Minister’s continued commitment to zero-based budgeting and to beginning to implement it in the Departments of Public Enterprises and Treasury.
We call on all governments departments, and all provincial and local governments to commence with zero-based budgeting processes in the next financial year to identify waste and fund priorities.
Taxes
The revised tax revenue, a shortage of R213 billion from the 2020 predictions, are disappointing but understandable given the collapse of vast sectors of the economy.
We welcome the revised corporate tax system which will lower the corporate tax rate from April 2022. We also welcome the announcement of personal tax bracket revisions that will assist lower and middle income earners.
We welcome the revised alcohol and cigarette taxes – it is preferable to personal tax increases and increases in VAT.
ENDS…