National Treasury's proposal aligns with DA’s Responsible Spending Bill
15 September 2023
Revelations from the secret meeting between President Cyril Ramaphosa, Finance Minister Enoch Godongwana, and Reserve Bank Governor Lesetja Kganyago, indicate that Government has realised that there is an urgent need to address South Africa's rapidly deteriorating fiscal situation. The meeting followed an announcement from Treasury that South Africa has effectively run out of money and that it would need to implement urgent measures to curb runaway government expenditure and ballooning debt amid deteriorating public finances.
Notwithstanding the Finance Minister's previous dismissal of the necessity for a new fiscal anchor earlier this year, Treasury has now proposed to the President that such a measure must be implemented. Its submission substantiates the DA’s long-held position on prudent fiscal management.
The ANC Government has failed to make the hard choices that are required to keep South Africa financially afloat. Decades of economic mismanagement have now come to a head. Poor economic policy choices that require substantial funding, such as the national health insurance (NHI), land expropriation, and continued bailouts of moribund state-owned enterprises (SOEs) rather than privatizing them have resulted in a hostile environment for investment.
In anticipation of the fiscal crisis that currently besets our economy, the DA already presented a proactive solution in the form of our Responsible Spending Bill. Our Private Member’s Bill mirrors the fiscal directives recently proposed by the Treasury.
The Responsible Spending Bill comprises of three key components:
A fiscal rule stipulating that, for the four financial years commencing with the Act's implementation, net loan debt as a percentage of GDP must not exceed the previous year's level.
A mandatory review of the fiscal rule by the National Assembly every four years, starting in 2026/27. The review will involve amending, renewing, or terminating the fiscal rule. The Bill also requires an annual Fiscal Responsibility Report, submitted by the finance minister, detailing compliance with fiscal rules and outlining recovery plans in cases of non-compliance.
The option for the National Assembly to grant exemptions to the fiscal rule for specific financial years upon the finance minister's request, given that valid reasons are presented, and the Standing Committee on Finance endorses the exemption.
By excluding capital expenditure from adjustments and focusing on current consumption expenditure, the Bill implicitly encourages the government to invest in capital projects such as infrastructure development, which will foster sustainable long-term economic growth and social well-being.
Our approach demonstrates the importance of balancing short-term fiscal prudence with strategic long-term investments.
With the National Treasury's recent endorsement of a fiscal anchor, we urge the Minister and all members of Parliament to support the Responsible Spending Bill as it not only responds to the immediate fiscal crisis but paves the way for a robust economic future.
Issued by Dion George, DA Shadow Minister of Finance, 15 September 2023
