Nedbank’s Chief Economist Dennis Dykes says the Finance Minister Tito Mboweni‘s budget presents the best solutions under the current difficult economic situation.
Dykes has attributed the deterioration in government finances to on-going measures to support Eskom.
Mboweni has announced R70 billion to assist Eskom to pay its debt over the next three years. This translates to R23 billion a year. Dykes says Mboweni faced some difficult choices.
“Unfortunately, the reality is the finances are stretched. So, I think what Treasury came with is the best solution under the circumstance. But it is going to be a tight call. My feeling is that they will wait until after the election to assess. What we need now is economic growth to get us out of this hole.”
Political parties react to the budget
The United Democratic Movement has expressed mixed views about Mboweni’s Budget Speech. The party says it is alarmed that Mboweni made no mention about Expropriation of Land Without Compensation.
However, UDM Deputy leader Nqabayomzi Kwankwa says the party welcomes the strict approach on giving out guarantees to state-owned entities.
“In the entire Budget Speech, there is nothing about Land. For a government that was saying recently it is committed to the principle of Land Expropriation Without Compensation and now it seems all of that has flown out the window. We must welcome one move; they have said that in so far as SOE’s are concerned, it’s not going to be a free for all when it comes to giving out guarantees. That is important because that was the situation during the decade of Zuma’s decadence. The problem was that they were throwing money at the problem rather than addressing the root causes.”
Malema says the minister has neglected to give a clear plan on job creation and the reduction of Value Added Tax (VAT), which currently sits at 15%.
“The budget was extremely flawed – a repetition of the same things he has said before. The minister has nothing to offer. He can’t take us out of this difficult situation we find ourselves in as a country. He’s still allocating money to buy land when we are amending the Constitution to Expropriate Land Without Compensation. No clear plan on how he is going to create jobs. He has not reduced VAT. Everybody else is complaining that 15% is too much.”
Meanwhile, Democratic Alliance (DA) leader Mmusi Maimane has criticised the Budget Speech saying it lacks a comprehensive plan to fix the ailing economy. Mboweni said the economy was expected to grow at around 1.5% – way below the 5% required to make a substantial dent in unemployment and inequality.
Mboweni announced a R1.8 trillion budget focused mainly on social development. However, Maimane says Mboweni seems to be distancing himself from fixing the challenges faced by state-owned enterprises.
“I’d hoped that the Minister of Finance would come up with an economic plan. None was forthcoming; he’d come up with a plan about which department we’re going to cut so that we can free up the resources to the people. None was forthcoming! He minced his words about state-owned enterprises by saying we should decide what we’re going to do, as if he is not part of the government. Projected growth this year was already from 0.7 to just over 1.2. This shows that actually the ANC has no plan to grow the economy.”
The Freedom Front Plus has raised concern about a number of points in the National Budget tabled by Minister Mboweni. The party says the early retirement of public servants and the current debt levels are concerning.
FFPlus Leader Pieter Groenewald says the government needs to ensure the success of farming projects relating to land reform:
“The fact that they are going to allow early retirement, we are going to lose some skilled people in our state departments. The FFPlus is worried about the debt situation. If we look at also 1.7 billion for 262 farming projects, there are so many farming projects when it came to land reform that actually collapsed that they first have to ensure that those projects are successful before they start with new ones.”
The African Christian Democratic Party says it is concerned about the increase in the country’s budget deficit and the high government debt.
ACDP MP Steve Swart says the party is, however, pleased the reduction in the public sector wage bill. “Last February, the then minister said it will be 3.8% and now we’re looking at 4.5%. That places massive pressure on our government debt levels which are now looking at 2.2 billion rand. But there was some good news looking at reducing the public sector wage bill. He was very firm about the state owned corporations and we hope that he’ll be able to implement that and implement the turn around.”