Business and mining sector appeal for game-changing budget
The Minerals Council SA and Business Unity SA say next week’s budget must be used to set SA on a new economic path
The Minerals Council SA and Business Unity SA (Busa) have appealed to the government to use next week’s budget to cut spending, set structural economic reforms in motion, and take steps to address the electricity crisis as top priorities for the country.
Both have also called on the government to allocate more government funding to the criminal justice system, both to prosecuting those responsible for corruption and to policing, as business, especially mining, is ravaged by violent crime.
Finance minister Tito Mboweni is due to table SA’s budget on Wednesday February 26, in the most difficult set of circumstances since democracy began in 1994. Economic growth has stalled for the past decade, the debt burden has risen exponentially and business and consumer confidence are in the doldrums.
At a briefing in Johannesburg on Friday, Minerals Council CEO Roger Baxter said that Wednesday’s budget is an event of enormous importance that must be used to set SA on a new economic path. The budget will also send a vital signal to the investor community and ratings agencies that SA is committed to taking the necessary steps to achieve this.
The government needs to show that it is serious about reining in debt and returning the primary budget — expenditure excluding debt-service costs — to a surplus within a reasonable timeframe.
Moody’s Investors Service, the last ratings agency to rate SA’s debt as investment grade, is due to make a rating decision in March for which which the budget will be decisive.
But the options open to Mboweni “are limited and painful”, said Baxter.
Top of the list is the implementation of the Treasury’s growth strategy, published last year by Mboweni. The emphasis on the fixing of network industries — electricity, rail and port infrastructure — is particularly important for mining, which has been severely constrained by energy and logistics supply problems.
Electricity supply constraints are directly responsible for the premature downscaling of the mining industry since 2007, which today is smaller in GDP terms than it was 1994, said the council.
“The mining industry supports the allocation of R250bn in fiscal support to Eskom over the next decade. However, these injections must be subject to strict criteria and performance by Eskom,” it said.
With load-shedding expected to be part of the landscape for the next two to three years, business also wants to see measures to promote energy efficiency included in the budget.
As SA does not have the resources to spend its way out of the crisis, it is essential to cut government expenditure. For both Busa and the Minerals Council, the most effective place to do this would be by curtailing the salary bill.
“Measures to meaningfully reduce the public-sector wage bill, over and above the voluntary retirement packages announced in the 2019 budget”, are needed said Busa in a pre-budget statement.
While the Treasury has in the past indicated that it sees reducing the wage bill as less damaging to service delivery than cuts to government services, the existing wage settlement with unions has another year to run and has not been re-opened for negotiation.