By Raymond Parsons
Against the background of difficult global and domestic economic circumstances, Finance Minister Enoch Godongwana generally delivered a realistic and credible fiscal message in the Medium-Term Budget Policy Statement (MTBPS).
South Africa’s public finances have now been put on a much more sustainable footing. Both expenditure and revenue were good-news stories, which help to build economic resilience.
It is in the main Budget later in February that the overall budget ‘judgement’ will acquire much more precision. The MTBPS, in crafting its rolling three-year spending plan, had to walk a fine line among the recent competing demands on the current fiscus.
It succeeded in combining prudence with flexibility in addressing South Africa’s socio-economic priorities within a framework of fiscal discipline.
The 2022 MTBPS has offered realistic policy trade-offs in the light of the existing economic constraints. In particular, there was welcome emphasis in the MTBPS on the commitment to expanded infrastructural investment; the extension of the social relief of distress grant until 2024; and the fact that further financial assistance to state-owned enterprises like Eskom and Transnet will be hedged with strong conditions.
It is also encouraging that greater capacity building at local government level is intended. Structural challenges require structural remedies, which include a much larger role for the private sector in finding solutions, especially in the energy and transport fields.
The risks to the MTBPS fiscal projections lie mainly at three levels. First, that the economic growth assumptions underpinning the ‘mini-budget’ may be too optimistic, given the prevailing global and domestic headwinds. The National Treasury has also warned of downside risks to the growth forecasts.
Second, a different outcome to the public sector wage negotiations may upset current fiscal projections. Third, a failure to deliver on certain key commitments in the MTBPS would elevate policy uncertainty and dampen the prospects for job-rich growth. The more SA is seen to fix its growth problem, the more attractive it becomes for investment.
Professor Raymond Parsons is a North-West University Business School economist.
BUSINESS REPORT