SONGEZO ZIBI: Godongwana must expand on key priorities, not pundit obsessions

Next week finance minister Enoch Godongwana will deliver his second medium-term budget policy statement (MTBPS). Unfortunately, most news coverage and public discourse will be reduced to a few issues, such as whether the government will introduce a basic income grant.

But the MTBPS is far broader than that. It should be an indication of how the government’s strategic priorities will be funded. Ultimately, it reflects the quality of the government’s overall governing strategy, as it relates to how it sees global and local strategic trends, threats and opportunities.

For example, by the time Godongwana delivered his budget speech on February 23 it was already evident that Russia would invade Ukraine within days (the invasion started the very next day). It had been likely from as far back as October 2021, when the minister delivered the previous MTBPS.

Though his failure to mention the tensions involving Russia, a significant supplier of energy and a major influence on global energy prices, could be forgiven then, I was floored that mention of the general global outlook was superficial. I wondered why he bothered at all.

Omissions such as this, either through institutional weakness or a worrying lack of understanding of the strategic forces at play in the world, lead to avoidably wrong assumptions. This sets us on a wrong course, where we are unable to respond adequately to global developments to protect the national economic interest.

As a result of Russia’s invasion the prices of key commodities such as oil, grain and fertiliser shot up, making inflation a real challenge. This was in addition to Covid-related global supply chain constraints that were already pushing prices up across the world.

By the middle of 2022 the government was facing protests over rising living costs, but the measures it took, such as reducing the fuel levy, could not be sustained, leaving only monetary policy instruments on the table. It is now common cause that like the rest of the globe the Reserve Bank is tightening monetary policy in response to inflation levels not seen for decades.

I am using this example to underscore the point that the MTBPS is designed (though not necessarily applied) to guide fiscal choices in ways that enable the country to respond to the most serious strategic threats while facilitating long-term socioeconomic development. The decimation of intellectual capacity in the SA state has meant the government’s understanding of its own strategic environment has deteriorated, leading to fiscal choices that don’t move the needle on any of our strategic priorities.

In February’s budget the provision for debt service costs was just over R363bn for the current financial year, and an average of R333bn a year over the medium term. A growing national debt is not a problem if the economy and state revenues are growing faster. But in our case the government will be hard pressed to ensure debt repayments do not exceed critical interventions required to stimulate labour-absorbing growth so that people can make a decent living.

There are those who insist the government should borrow more, but become silent when asked whether it is acceptable that servicing debt should become our number one spending priority. Strategic priority realignment and reframing are necessary if we are to have a fiscal framework and direction that produces real and sustainable outcomes. This does not mean throwing the baby out with the bathwater by resetting everything, but some key decisions need to be made by a different government.

In the field research we have done at Rivonia Circle the economy and jobs are often seen by respondents as a single, top priority. I agree with this. But for the government it is important to see this together with the other major driver of unemployment and therefore poverty: the fact that millions of South Africans do not have matric and have never had a proper job in their lives. No amount of industrial policy gymnastics will change the fact that an unskilled person is difficult to employ in a modern economy.

Improving these people’s job prospects requires a fundamental rethink of the sector education & training authority system, specifically how it can be geared to prioritise low and medium skills level industries, where SA has a reasonable prospect of succeeding. We need properly funded public employment schemes that combine school-level and post-school vocational training with employer incentives to provide on-the-job training. The Bank has produced an excellent working paper on this  so the thinking is there but largely unutilised.

Crime is the second major strategic priority. Families, individuals and businesses are under siege in SA, with criminal syndicates having expanded their reach to include muscling in on industries and in effect chasing away investment and jobs. The trucking and construction mafias in KwaZulu-Natal and the so-called zama-zamas mining illegally in Gauteng are a prime example, with the cancer now spreading to provinces such as Eastern Cape. 

I have no expectation that the finance minister will say anything meaningful about this priority because there has been nothing said about a major shake-up of the security establishment, including retooling and reforming the SA National Defence Force. It is in a seriously poor state and can no longer be trusted to protect the nation from any serious threat. It is not possible for sustained and inclusive economic growth to occur in a high-crime environment, and it is time the government’s fiscal, policy and institutional reform priorities reflected the importance of this issue.

The third priority must be municipal administration, which has collapsed. If our goal is a prosperous society where hard-working families and people are able to make a decent living, we have to ensure each locality functions properly. In this respect I would expect a section 100 intervention in all municipalities with realisable large-scale economic prospects that are under strain or close to collapse. It is untenable for companies to have to take the Treasury to court to force the government to act, as we have seen in some recent cases.

The fourth priority is water infrastructure, which is as critical as the fifth, electricity. Lately the two are often simultaneously problematic as rolling blackouts hobble water pumps at key regional reservoirs. Both water and electricity shortages have a significant effect on quality of life and the economy, which needs to grow fast to reduce our pressing unemployment and poverty problems.

These priorities and the MTBPS exist in a rapidly evolving and risk-laden global environment in which energy and other resources are in effect a geopolitical tool. Just this week Russia and Ukraine were again squabbling over the months-old deal to allow grain and other commodities to be exported via the Black Sea. This situation means the SA government could think differently about the size of the contingency reserve and the purpose for which it may be used later.

Ultimately, how a government thinks about strategic imperatives determines how fiscal priorities are set and resources deployed. The MTBPS should offer us a meaningful peek into government thinking, not address single issues that make headlines while leaving SA none the wiser on the most critical matters affecting the country.

• Zibi is chair of  the Rivonia Circle and author of ‘Manifesto — A New Vision for SA’