Mboweni’s promises, contradictions and lunacies

Cabinet meetings must be fun. Ministers make mutually exclusive proposals to which all agree. No-one says “Hey, doesn’t that contradict what we’ve just decided?”

So it is with the “mini” budget, Wednesday’s medium-term budget policy statement (MTBPS). It predictably promises an end to our crippling tax-spend-debt-regulate fest. Yet every measure before the parliament before which finance minister Tito Mboweni spoke proposes the opposite, as do aspects of the budget.

BusinessTech listed six (of many) laws “you should know about in 2020”. All six envisage more, where the budget promises less. The worst by far — not in their list — is the Upgrading of Land rights Act (Ultra) Amendment Bill, which proposes expropriation without compensation for 4-million (mostly) low-income black-owned homes worth nearly R1-trillion.

As in the government’s recent economic reconstruction and recovery plan, gems were well hidden. The most significant, if it happens, is the removal of “needless red tape”, so as to make SA “a great place to invest”. Do not hold your breath. The same has been promised in every state of the nation address and countless ministerial budget speeches, all of which were followed by the opposite. Perhaps irrationally, I’m tempted to think it might happen this time.

There was a promise of policy certainty and recognition of its importance. The subtext of the emphasis on certainty for farmers might imply backtracking on expropriation without compensation.

A R300bn spending cut was promised by 2024 — a meaningless proportion of a R5-trillion budget. Its virtue is not size, but the prospect of a cap on spending. According to Rain’s Michael Jordaan, only 15 countries have higher personal tax rates than SA. Much more substantial cuts are needed than were promised, but thanks for small mercies.

As usual, there was much about what is planned for future years, which is close to meaningless because, just as past promises were ignored in this budget, they will be ignored in future budgets. Mboweni promised a paltry R84bn surplus by 2025/2026. The contradiction lost on him and commentators is that promised “zero-base” budgeting is inconsistent with strident projections. That aside, he promised to “discard what is not needed”.

The most disturbing proposal was a five-fold debt increase from about R1-trillion in 2010 to more than R5-trillion in 2024, that is from about 30% to nearly 100% of GDP. More money will be spent on debt than anything else.

The looniest part, on which there is consensus among opposition political parties, was another R10.5bn for SAA. That brings total grants and guarantees to an amount approaching R80bn, enough for nearly 1-million houses, 10,000 clinics or 500,000 police officers. Instead the police budget was cut. To reallocate spending from the poor, who do not fly, to the rich, who do, is unconscionable. The formerly oppressed have fallen hopelessly in love with apartheid dinosaurs inherited from their former oppressors.

The minister magically reconciles such waste with the World Bank’s $2bn (R33bn) loan condition that the government must stop funding failed state-owned enterprises by diverting spending earmarked for the poor.

If the government wants prosperity, there is one way, and only one way, to get it, which is to have policies that move us up the Economic Freedom of the World (EFW) index. When we moved down before 1994, we stagnated. When we moved up under Nelson Mandela, we prospered. When we moved down again under Jacob Zuma, we stagnated. If we free the economy, we can grow at, say, 7%. That would get us back to where we were in three instead of 70 years, and we would double wealth every decade thereafter. In the time since apartheid, we could be one of the world’s richest countries.

The lockdown destroyed (he wrote optimistically) 7% of GDP wealth; closer to 15% according to some experts. Tweeting about his and the Treasury’s bold proposals in August 2019, Mboweni wrote: “What are critical Economic Strategic Reforms? Read the National Treasury … Document! Let us move Forward! Many Steps at the same Time!! Movement!! No time for procrastinating!!” Indeed, but there was not enough of those pro-market proposals in this budget.

What remains to celebrate is the promise of whole or part privatisation (public-private partnerships) of government activities. He specifically mentioned hospitals. The subtext might be that nuttier aspects of national health insurance (NHI) will be ditched. NHI is a peculiar name for the proposed prohibition of health insurance to be replaced by socialised care.

Mboweni assured us that there is a competent team planning “structural economic reform”. They will get it right only if they study the EFW index. Another fleeting gem was the promise of relaxed foreign exchange (forex) control to facilitate “cross-border flows”. Forex control is another apartheid — actually Nazi — dinosaur with which they fell in love. It should, as in winning nations, be abandoned.

He promised to reduce senior public service salaries and cut the rate of increases for the rest, and shift from wasteful consumption to infrastructure investment. This has also been promised. Will it be finally be delivered?

There was the inevitable promise of employment without promising the only way to get it, namely relaxation of anti-employment minimum wage and labour laws. Nearly 60% of 15- to 24-year-old youths are unemployed, including three out of four young black women.

Finally, how should we score the budget? Against what he could get away with politically, seven out of 10. Against what we need to prosper, three out of 10.

• Louw is executive director of the Free Market Foundation.

LISTEN | Dissecting Mboweni's MTBPS with Investec's Annabel Bishop

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