DION GEORGE: Political will is required for budget to address myriad economic woes

As SA braces for the 2023 budget, expectations are high and pressure is mounting on the finance minister to deliver from an empty cupboard. Extreme global and domestic macroeconomic volatility in recent years has resulted in significant adjustments to the outlook for public finances from one fiscal statement to the next — and this week’s budget is likely to follow this trend.

The DA is clear on what we expect from the upcoming budget. To change the direction of our deteriorating economy we need a laser-sharp and unyielding focus on growing the economy, securing a reliable energy supply and reducing the cost of living for all. It is possible for the minister to achieve these outcomes if there is sufficient political will.

The cost-of-living crisis

Hard-pressed SA households live with the ominous threat of constant rolling blackouts, upwardly spiralling food prices, increasing fuel and transport costs, and the looming prospect of electricity price hikes from April.

According to NielsenIQ, the skyrocketing cost of living is the primary cause of financial strife as a staggering 41% of South Africans report being in a worse financial position than they were a year ago, while nearly half report that they cannot afford basic necessities.

In just one year the average cost of the household food basket has risen a jaw-dropping 11.7%. The situation is growing increasingly untenable, with many families struggling to put enough food on their tables while some face the very real threat of starvation.

The DA has proposed to expand the zero-VAT-rated food basket to include items such as bone-in chicken, beef, tinned beans, wheat flour, margarine, peanut butter, baby food, tea, coffee and soup powder.

The DA has further proposed scrapping fuel levies to address the plight of fuel users in SA. With transportation costs set to continue their upward trajectory, this decisive move will have an immediate effect on all South Africans who rely on fuel for travel and business operations. By lifting the heavy burden of fuel levies the DA’s proposal will put money back into the pockets of hard-pressed consumers, allowing them to spend their hard-earned cash on what matters most to them.

The minister can implement these proposals without any effect on service delivery if he better manages the public finances. Instead of wasting money on government entity patronage networks that make a few political cronies rich, he could make a real difference to the lives of millions.

Keeping the lights on

A reliable, efficient, affordable and sustainable electrical infrastructure is the lifeblood of any thriving economy. It is as fundamental to economic growth and development as a stable and just government is to a democratic society. Without energy to fuel economic activity, we cannot hope to achieve an equitable and inclusive SA. Intensified rolling blackouts are destroying our economic prospects.

In 2022, SA recorded its worst year on record in terms of foregone GDP from blackouts. The outlook for 2023 is equally grim, with severe power cuts expected to reduce growth by as much as two percentage points in 2023, according to the SA Reserve Bank,

We cannot hope to drive investment and growth without addressing the security of our energy supply. The need to address the electricity crisis adequately is, therefore, urgent.

The minister must prioritise incentives that will unlock energy opportunities that make consumers independent of Eskom and build resilience into our electricity supply. Failure to act urgently will result in further disruptions to operations and supply chains, lower business confidence and delay investments. This will ultimately affect net employment creation, compounding the already dire situation.

The DA’s energy sector reform package offers practical and sustainable solutions to the electricity crisis. Opening the energy sector to independent power producers can ensure a sustainable energy supply. In the short term, the government must implement a solar tax rebate incentive and Eskom must streamline its procurement processes and eventually make way for private capacity to power a potentially rapidly growing country.

Creating a new electricity ministry and declaring a national state of disaster is a mark of desperation from a government that has run out of options within its nonsensical belief that a dysfunctional government at the centre of our economy can somehow create economic growth and desperately needed jobs.

Growing the economy

SA is staring down the barrel of a global slowdown, compounded by severe local problems. The Reserve Bank has painted a bleak picture for the nation’s economic outlook, forecasting a sharp slowdown in growth from 2.5% in 2022 to a meagre 0.3% in 2023.

To stimulate sustainable economic growth an attractive investment environment is crucial. There are multiple obstacles to this, including high debt levels, persistent deficit spending, high unemployment, declining capital formation, low levels of education and rising living costs. Additionally, uncertain property rights, onerous labour laws, inadequate governance and monopolistic state-owned enterprises compound these challenges.

These growth impediments demand immediate intervention. Easing regulation and untangling business from red tape can create a business-friendly environment that promotes innovation, investment and growth. Failure to do so will keep SA lagging behind its emerging-market counterparts.

It’s time for a change in mindset. The private sector must be empowered to play a greater role in driving economic growth, with the government acting as an enabler rather than an impediment. By doing so we can create a virtuous cycle of economic growth that benefits all South Africans. But this will require a fundamental shift in the way we approach economic policy and governance.

Amid a climate of heightened demand for government accountability, it is imperative that we expect nothing less than an effective and efficient administration. SA’s government must prioritise providing essential services while allowing the economy to thrive by embracing market forces and reducing barriers to entry. Economy-distorting race-based legislation and the suboptimal deployment of cadres must end.

This budget presents an opportunity for the minister to demonstrate a commitment to an approach that enables private sector involvement, which is necessary to drive virtuous economic growth and pave the way for a future where everyone has equal opportunity to thrive and succeed. Citizens must demand nothing less.

It’s time for government to take bold action and make the tough decisions necessary to grow the economy, keep the lights on and reduce the cost of living for all South Africans. The minister has nowhere to hide.

• George is DA shadow finance minister.