DONDO MOGAJANE: A confidence-boosting budget, but government should address missing link

The finance minister’s budget speech has achieved the impressive feat of balancing the many demands on government’s purse, while prioritising the programmes most critical to SA’s economic recovery.

Overall, amid so many competing interests finance minister Enoch Godongwana has managed to deliver a budget that will boost the most productive sectors of the economy and address some of our most pressing challenges. And the National Treasury must be applauded for having pulled yet another rabbit out of a hat when it was least expected, providing financial support for essential programmes while reining in government debt and avoiding tax increases.

With the budget speech now past however, businesses and investors will be closely watching for signs of efficiency in spending. The leaders of private businesses will now be watching to see that the resources allocated are spent efficiently and that government’s plans are implemented.

This has been the missing link for many years, and implementation is critical, otherwise we will essentially be throwing money into the ocean rather than reigniting the country’s economic recovery and growth.

An example of a critical action area is the additional support provided for the energy sector. In the budget speech Godongwana announced that the Treasury will provide R254bn in total debt relief for the troubled power utility Eskom, which remains at the centre of the energy crisis.

Many believed government would need to dig even deeper into its coffers or implement tax increases to take on a portion of Eskom’s debt. Some had even speculated that we could see VAT increases of up to three percentage points — which we are all relieved to see has not been the case.

However, a reliable energy supply remains the key to unlocking SA’s economic recovery, so resolving the problems at Eskom is critical to boosting business confidence and encouraging new investments in the economy. Energy is one of the country’s greatest risks, and we now need to see the implementation of plans to enhance Eskom’s performance and improve existing power supply.

Fighting crime

Likewise, tax incentives for solar power solutions and support for independent power producers will do wonders for businesses and the economy. Overall, the year ahead could be very good for business — if government does what it has said it will do.

A second welcome sign for business leaders was the added financial commitments made by Treasury towards fighting crime — but companies will still need to see a greater crackdown on crime, as well as enhanced police visibility. For example, ongoing allegations of organised crime continues to hound the construction sector that could significantly hamper the rollout of planned infrastructure.

The private sector must be allowed to participate in the rollout of government’s infrastructure plans to stimulate greater business growth and job creation. However, there are a number of stories of businesses and contractors being held to ransom by criminal groups that directly affects their ability to perform on their deliverables.

Without addressing these issues, the infrastructure rollout will stagnate. The additional funding provided to the security sector must result in significant improvements in policing and crime intelligence, or crime will continue to limit businesses or advancements in the rest of the economy.

Additionally, financial crimes and the illicit economy are directly affecting companies’ growth, preventing the private sector from making further investments in new businesses or prospering. It was therefore positive to see that the SA Revenue Service received additional funding to enhance their administrative capacity and combat financial crime, and that the country has addressed lingering weaknesses identified by the Financial Action Task Force.

Turnaround plans

A culture of impunity and lawlessness has deterred private sector investments, but by demonstrating that the state is in control and making investors feel more secure, businesses can flourish.

Another point of concern is the turnaround plans for SOEs, especially in light of the additional funding commitments made to SAA, the SA Post Office (Sapo) and Land Bank. The Land Bank secured a R5bn support package, while SAA was allocated R1bn to assist with its business rescue process, and Sapo was allocated R2.4bn.

The Land Bank is vital to the success of the agriculture sector, providing an important service to farmers and agribusinesses through its lending programme, and assisting to strengthen SA’s food security. However, questions remain about SAA and Sapo.

SAA’s funds will at least be used as part of its business rescue plans in recognition of the challenges that the aviation industry has faced, but more detail is needed regarding exactly what the airline intends to do with the funds. It also needs to finalise its ownership and get in the game for this to be a worthwhile investment.

There seems to be no turnaround plan for Sapo, or details regarding how its leaders intend to restore it to profitability. All allocations in spending should see positive results or be put towards other more productive investments.

South Africans and business leaders want to see a return on government’s investments. The budget speech contained a number of positive signals for businesses, but now it’s time for implementation and measurable results to be seen.

• Mogajane, a former director-general of the National Treasury, is CEO of the Moti Group.