FILE – Finance Minister Enoch Godongwana tried to strike a balance in his budget, says the writer. Godongwana delivers his maiden Medium Term Budget Policy Statement (MTBPS) on November 11, 2021 in Cape Town. Photo: Phando Jikelo/African News Agency(ANA)
FILE – Finance Minister Enoch Godongwana tried to strike a balance in his budget, says the writer. Godongwana delivers his maiden Medium Term Budget Policy Statement (MTBPS) on November 11, 2021 in Cape Town. Photo: Phando Jikelo/African News Agency(ANA)

Political will and honesty are key factors in economic reform agenda

By Opinion Time of article published Nov 14, 2021

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OPINION: Prospects look good for the country’s economic recovery. The fact that R120.3bn has been collected in taxes means that there is money to cater for the poor and to sustain the country. All that is needed is the political will to do the right things, writes Professor Bheki Mngomezulu.

Following Minister Enoch Godongwana’s maiden Medium Term Budget Policy Statement (MTBPS) on November 11, there have been mixed reactions from different sections of society – including politicians and economists. Some hail the speech as pro-poor while others argue that it lacked substance.

For me, the key question is whether this budget speech speaks to the needs of ordinary South Africans in terms of reducing the unemployment rate, poverty and rooting out social inequality.

On paper, the minister made the correct noises. For example, he prefaced his address by saying that the first priority is to get South Africa’s financial house in order. This creates the impression that he did his homework in terms of establishing the root cause of the challenges enumerated above.

Implicit in this statement is that once the country’s financial house is in order, the government will be able to address the 34.4% unemployment rate (or 44.4% when using the expanded definition). The allocation of R74 billion for employment programmes is a wise move with great prospects to reduce the excessively high unemployment rate.

Once unemployment has been addressed, poverty would most likely be reduced too. Regarding inequality, this is a more complex matter which cannot be resolved overnight. Even if the country’s economy is doing well, inequality could still exist unless it is confronted head-on through a legislative process.

The minister’s call for structural reforms is a move in the right direction. It is clear that the existing laws have failed to achieve the intended result of improving the lives of ordinary citizens. However, the speed in which these reforms are introduced and the political will and honesty accompanying them would determine whether ordinary South Africans see the envisaged changes in the short to medium term.

Godongwana’s view that the country must redirect public spending to favour social and economic development, leads to the conclusion that he is aware of the plight of many South Africans. Once there is social and economic development, the lives of South African citizens will improve. His awareness about the total amount of R334.5bn used in this year alone to service public debt means that he fully understands the magnitude of the country’s financial challenge.

The realities of the impact of the Covid-19 pandemic could not escape the minister’s attention. While reflecting on these impacts, he did not forget the majority of South Africans who are the hardest hit. On this matter, Godongwana tried to strike a balance. On the one hand, he conceded that this pandemic has had adverse effects to the country’s economy –which is why it contracted by 6%. However, he expressed optimism that the economy will grow by 5.1% due to the high demand of South African raw materials by the international market.

Expanding on this point, the minister confirmed that the R350 relief of social distress grant will continue until March, then the government will decide on the way forward. This shows the government’s concern about the plight of the poor. But what remains a challenge is the sustainability of this grant.

Equally important is the grant’s impact on the pace of approving the basic income grant that would ensure that the needs of the poor are better addressed. While the R350 received by 9.5 million citizens is a welcome initiative, the reality is that it is a drop in the ocean since almost everything has gone up.

After subtracting transport fares to and from the pay centres, the recipients of this grant are left with close to nothing to be able to sustain themselves and their families until the next month.

One of the most telling proposals from the minister was getting rid of underperforming state-owned entities (SOEs) and halting bailouts by the government. If this were to happen, government would be able to redirect the bailout finds to important social programmes. But whether this will come to fruition remains to be seen.

Government’s decision to allocate R450bn to local governments with the view to make them stable and capable is a welcome move. However, for these funds to meet the intended objectives, municipal staff should have the requisite skills and financial knowledge. By his own admission, the minister stated that 43 municipalities are in crisis while 100 more are at risk. This means that funds allocations should be accompanied by up-skilling of personnel so that the electorate could see real change and experience the betterment of their lives.

In a nutshell, prospects look good for the country’s economic recovery. The fact that R120.3bn has been collected in taxes means that there is money to cater for the poor and to sustain the country. All that is needed is the political will to do the right things.

* Professor Bheki Mngomezulu is professor of political science and deputy dean of research at the University of the Western Cape.

** The views expressed here are not necessarily those of IOL and Independent Media.

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