A budget of missed opportunities
22 February 2023
The Minister of Finance's annual budget speech is yet another missed opportunity for South Africa. While he claims that bold action is necessary, the truth is that there is nothing bold about this budget. The Minister has failed to announce any meaningful structural reforms that could drive economic growth, incentivize domestic savings, attract foreign capital, and protect vulnerable South Africans.
This budget completely ignores the country's mounting debt problem, and in fact adds to it. It offers no solution to revitalize state-owned enterprises or address the energy crisis. The Minister has missed an opportunity to bolster domestic savings by increasing the tax free savings limits, amongst others.
No steps are taken to encourage foreign capital investment through further relaxation of exchange control. Neither were any steps taken to alleviate the burden on overtaxed South Africans. Instead, he has chosen to move funds away from social development programs.
To help the most vulnerable South Africans, the Minister could have easily dropped fuel levies and increased the zero-VAT rated food basket, without any impact, given the tax overrun. He also announced no measures to cut back on unnecessary, wasteful government spending. This reveals an uncaring government that is out of touch with the daily hardship of South Africans households.
The Minister's announcement of bailouts for failed state-owned enterprises including the Land Bank, Post Office, and SAA is a clear misallocation of public funds. However, this pales in comparison to the mother of all bailouts - the offloading of over R 250 billion of Eskom's debt onto our sovereign balance sheet.
This proposal is not only irresponsible, but it also lacks any coherent plan to restructure Eskom and address the energy crisis. In fact, this move will only serve to increase interest payments even further, without any incentive for Eskom to become more efficient. It is clear that the Minister is more concerned with maintaining the status quo than with driving meaningful change or taking the bold action that he claims is necessary.
The DA firmly opposes these bailouts, as they have failed to stimulate corporate revitalization and growth necessary to address the underperformance and financial struggles of these entities. Today, the continued bailouts expose the government's disinterest in implementing actual structural economic reforms.
The Minister failed to mention the President's proposed holding company for SOEs, the National Health Insurance, or the new Minister of Electricity. This adds to current economic policy incoherence and promotes uncertainty. The DA will not support funding for any of these expenditures.
We welcome the Minister's efforts to bolster crime-fighting institutions, such as the NPA, FIC, SIU, and SAPS. However, given South Africa's likely Greylisting later this week, it is imperative that these institutions' capabilities are strengthened even further. Urgent steps must be taken to improve collaboration between financial authorities and security authorities if South Africa is to exit the Greylist as soon as possible.
We further welcome incentives to provide for solar installations through introducing a tax rebate. The Minister however did not make the bold move required and the relief is hopelessly inadequate.
This budget speech does not offer bold action and fails to address the urgent economic crisis facing South Africa. The DA’s alternative Budget set out what is possible if the Minister was in fact bold but he certainly was not, and missed an opportunity to set us on the path to a sustainable economic recovery.
Issued by Dion George, DA Shadow Minister of Finance, 22 February 2023
