ANC’s Bailout Budget
21 February 2024
The Minister of Finance's annual Budget is another indication of a panicking ANC Government that has no plan to accelerate economic growth, resolve relentless blackouts, stabilise debt, reign in runaway expenditure, support vulnerable South Africans and combat corruption.
The DA notes the Minister’s announcement of Government’s support for private-public partnerships to rebuild South Africa’s crumbling infrastructure. Yet, there is a notable absence of a coherent plan to fast track this initiative. The DA has already made proposals to implement such a model.
The DA further notes there appears to be no further direct bailouts to SOEs and no additional funds are allocated to the doomed NHI.
This is where the good news ends.
Government has further adjusted its growth forecast downward to 0.6%, significantly impacting revenue collection and the funds available for service delivery – revenue is R56 billion lower than expected this time last year.
Load-shedding and the crisis in our logistics sector has also impacted revenue generation significantly. Revenue generated from the mining sector decreased by 39.2% while revenue generated from manufacturing sector decreased by nearly 6%.
The lower-than-expected growth and revenue shortfall has prompted Government to launch its raid on the South African Reserve Bank.
On the face of it, it appears that Government intends to drain the Gold and Foreign Contingency Reserve Account of R150 billion in the first instance. The DA has already indicated that we strongly oppose this desperate bailout measure.
This frantic response to South Africa’s self-inflicted fiscal constraints fundamentally misunderstands the role of central bank reserves in maintaining monetary stability and investor confidence. Liquidating reserves for short-term gain will increase inflationary pressures, undermine the credibility of monetary policy, and signal fiscal irresponsibility to international markets.
Resorting to the GFECRA as a fiscal stopgap will diminish South Africa's standing among global investors and suggest to policymakers the erroneous notion that fiscal discipline can be forsaken for expedient solutions.
This will in no uncertain terms lead to runaway profligacy and further fiscal problems.
Despite a marginally reduced debt-to-GDP stabilization ratio, South Africa’s debt burden remains excessively high and unsustainable. The daily cost of servicing this debt now exceeds R1 billion and it is the largest expenditure item in the national budget by over R60 billion. This figure would have been significantly higher had the government not resorted to seek relief through the South African Reserve Bank to bail itself out.
Although Government claims to be making progress on resolving relentless blackouts, the return of high level load-shedding ensures that the lights remain off, and Government commitment to unbundling Eskom is not moving fast enough while the entity continues to generate enormous losses.
In the Medium-Term Budget Policy Statement (MTBPS) the Minister eluded to introducing a fiscal anchor in this year’s budget as a mechanism to achieve consolidation. The Minister has reneged on this promise. Fortunately, the DA has already introduced a Responsible Spending Bill that seeks to achieve this exact outcome.
We further note with concern that Treasury continues to work with Transnet to offload the entities’ debt onto the sovereign balance sheet. This situation is not dissimilar to Eskom as the entity reflects an inability to repay its debt and needs to borrow even more to remain barely operational. A better solution would be to accelerate Transnet’s privatisation.
Despite the President’s commitment to restructure the size of the State, this is not reflected in the numbers. The public sector wage bill continues to balloon unsustainably an additional R251 billion has been budgeted to cover an increase in the public sector wage bill due to a two-year deal agreed on last year. while expected budget cuts of R58 billion, also announced in the MTBPS, were reversed.
We note the extension of the Social Relief of Distress (SRD) grant to next year. There is a notable absence of any policy decision or funding solution over the medium term. The DA has proposed evolving the SRD into a job-seekers grant.
This Budget is a confirmation that the ANC only cares for its own survival and not about the plight of battling South African households who are unable to put enough food on their tables. There was no mention of the so-called food security plan of action, announced last year, to protect consumers from the burden of skyrocketing food prices.
The Minister could very easily have expanded the zero-VAT rated basket of food to bring immediate relief to South African households. He could also have reduced the taxes and levies on fuel which would have provided further relief.
Government is clearly disinterested in having South Africa removed from the FATF greylist. The R628 million allocated to the Department of Justice to implement the Financial Action Task Force (FATF) and State Capture Report’s recommendations is woefully insufficient and there is no reason why additional funds could not have been allocated to the National Prosecuting Authority (NPA), Special Investigative Unit (SIU), and Financial Intelligence Centre (FIC) in this regard.
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 a rescue plan for our economy. The Minister missed an opportunity to set us on the path to a sustainable economic recovery.
On the 29th of May South Africans have the opportunity to replace this utterly dysfunctional, incompetent government that does not care.
Issued by Dion George, DA Shadow Minister of Finance, 21 February 2024
