This week’s medium-term budget policy statement, delivered by Finance Minister Tito Mboweni, was a frank and blistering account of the government’s fiscal deterioration – a clear warning that the country is teetering on the edge of economic failure. The statistics were stark:
- The budget deficit has grown to 6.2% of gross domestic product since February (from 4.3% previously);
- National debt is projected to soar to R4.5 trillion over the next three years;
- Tax collection is down by R53 billion; and
- Growth is moribund at just 0.5%.
While kudos can be offered to Mboweni for this stark assessment, the governing party and its alliance partners must ultimately take responsibility for their own damaging internal political dynamics that leave it in a parlous state of policy inertia.
The policy statement offered precious little on concrete steps to counter the effects of financially draining and failing state-owned enterprises.
Labour’s response to the push to unbundle and split Eskom into three separate business units offers a lens into the inability of the ANC to bring its alliance partner into the fold in any meaningful way. If it does unbundle, it is damned; if it does not, we will run out of money.
The threat by the National Union of Mineworkers to plunge the country into darkness is, at best, a cynical call. At worst, it drives whatever positive investor sentiment remains into retreat.
There is no doubt, too, that the state’s massive wage bill needs to be trimmed. It is astounding that 29 000 state employees earn more than R1 million a year. The call for 30 000 civil servants to take voluntary severance or early retirement has drawn a poor response.
Collapsing tax collection and rising unemployment are clear threats to any fiscal progress. Implicit in this week’s policy statement was the possibility – more likely the certainty – of an increase in the tax burden of an already stretched consumer. The alternative is lifting corporate tax, itself becoming a massive disincentive for foreign cash.
Make no mistake: the wolves are at the door. If the ANC fails to take concrete steps to actively repair the rampant draining of resources over the past 10 years, the country will be plunged into financial darkness for generations to come.
Get to work now.