The new Minister of Finance, Tito Mboweni, delivered his “maiden” medium-term budget policy statement four weeks ago in Parliament.
The metrics were bad and took the markets by surprise, and as a result, the rand tanked and bond yields spiked.
But there were elements of the medium-term budget policy statement that were courageous.
To his credit, the minister took on the wreckers inside the governing party, warning them not to attack the mandate and independence of the reserve bank.
Which is exactly what the wreckers inside the governing party needed to be told as they force us closer to the brink.
- Economic Trouble
We are in deep economic trouble and the minister was absolutely right when he warned that we are at a crossroads.
We have a growth problem, with an average economic growth rate of 2% expected over the medium term between 2019/20 and 2021/22.
We have a revenue problem, with a revenue shortfall of R57 billion expected over the medium term between 2019/20 and 2021/22.
We have an expenditure problem, with an expenditure overrun of R23 billion over the medium term between 2019/20 and 2021/22.
We have a state-owned enterprises problem, with zombie state-owned enterprises requiring billions of rands in bailouts between 2019/20 and 2021/22.
We have a deficit problem, with our fiscal deficit expected to blow out to R251 billion, or 4% of GDP, by 2021/22.
We have a debt problem, with our national debt expected to reach a staggering R3.7 trillion, or 59% of GDP, by 2021/22.
And we remain a small open economy with “twin deficits” making us vulnerable to external shocks.
- Debt Ceiling
Which is why we welcome the minister’s announcement that it is now time to consider a new “fiscal anchor”.
The aim of fiscal policy has been to stabilize national debt, which has been a spectacular failure given the fact that national debt will increase from R627 billion, or 26% of GDP, in 2008/09, to a staggering R3.7 trillion, or 59% of GDP, in 2021/22.
What this means is that we will be spending a staggering R247 billion on debt service costs in 2021/22, which is the equivalent of what we will spend on basic education this year, in 2018/19.
We think the solution is a statutory fiscal rule and we are in the advanced stages of preparing a Private Members Bill, called the Fiscal Responsibility Bill, which will make provision for a “debt ceiling”.
We cannot go on like this and we hope that the minister will not allow himself to be muzzled and will continues to take on the wreckers inside the governing party.
He started off well by:
- by saying that zombie state-owned enterprises like South African Airways should be shut down; and
- by saying that those who support land expropriation without compensation are ill informed.
Which, of course, was greeted with horror by the wreckers inside the governing party, because they still reminisce fondly about the good of days of Check Point Charlie and Aeroflot.
The minister needs to take on:
- Jeremy Cronin, who is still shackled to the idea of a Soviet-style central state planning commission and who thinks the National Development Plan consists of “some useful insights and recommendations, intriguing but untested proposals, summaries of programmes long under way, and much else”.
He needs to take on
- Rob Davies, who is still shackled to the idea of a Soviet-style smokestack economy with workers toiling around blast furnaces happily singing “Arise ye workers” as they deliver a perfect rendition of the “The Internationale”.
The minister needs to take on:
- Ebrahim Patel, who is busy weaponizing the competition commission to stamp out monopolies in the private sector, while doing everything in his power to protect monopolies in the public sector, including desperately clinging on to the biggest monopoly in the country, Eskom.
Of course, there is one wrecker the minister does not have to take on and that is Yunus Carrim, because he is a “Communist of a Special Type”.
He fights the struggle of the working class, not from the factory floor, or from the plains of Outer Mongolia as he often claims, but from the lobbies of the most lavish hotels in Washington.
And that is because his best kept secret is … wait for it … that despite being a leading member of the Communist Party, he serves as a board member on the parliamentary network of …wait for it … the World Bank and the International Monetary Fund.
Oh, and the minister should not forget Nomvule Mokonyane, who is more of a nutter than a wrecker, and who thinks that we can just “pick up the rand”.
In the end, we welcome the fact that the minister:
- has decided to remain on Twitter; and
- has decided to be more careful on Twitter.
We know he has had a bad start, but things will get better and we look forward to debating the best ideas to take us forward in South Africa.