On Wednesday, it will be exactly 20 months since Tito Mboweni, having made a dramatic return to the cabinet a few days earlier, after Nhlanhla Nene relinquished his post, gave his first midterm budget policy statement. In his wildest dreams, he couldn't have predicted how he would be marking the occasion.
If the finance minister’s subsequent statements are to be believed, he has always been a reluctant holder of this particular office, having felt he had no choice but to give up lucrative private-sector positions after President Cyril Ramaphosa made the call.
That first midterm budget policy statement on October 24 2018 would have been largely completed long before anyone knew that Mboweni would be delivering it, so it is rightly not regarded as his. It has been followed by one other and two full budgets of his own.
From the most important budget in just over decades in February, this one might well be the most crucial in more than a century, if judging by the enormity of problems it has to confront.
He must have tired over the past couple of years as each one of his budgets was built up by commentators as being perhaps the most important since at least 1997 when Trevor Manuel, as the country's first black minister of finance, faced a sceptical market still unsure about the policy credentials of the new government.
“Give or break” or “last chance” and similar expressions were common before Mboweni unveiled his last budget just four months ago. Then, the biggest problem was whether the government would be able to produce a credible budget with a plan on how to deal with the country’s spiralling debt.
He tried his best, including inserting an ambitious plan for arresting an unsustainable jump in public-sector wages, but could not avert the downgrade that has seen SA join the ranks of “junk” or sub investment-grade countries. After a “lost decade”, during which Mboweni was not in government, work and sacrifices by postapartheid administrations had been undone.
Mboweni will address the nation on Wednesday in conditions that have much changed again — for the worse. From the most important budget in just over decades in February, this one might well be the most crucial in more than a century, if judging by the enormity of problems it has to confront.
When one looks at the numbers that have already been leaked — a budget deficit of more than 14% in 2020/21 and a debt-to-GDP ratio of more than 100% in less than a decade — it’s hard not to be filled with dread. While nobody could have foreseen the Covid-19 disaster and its impact, the fiscal crisis predates it and the country had shown little urgency in dealing with it.
Will it be different this time? The noise from the ANC’s alliance partners isn’t encouraging. It’s still about slogans rather than practical solutions that can help overcome the country’s crisis.
That the economy is in need of a short-term boost or stimulus is not in question. The problem is how to fund it and at the same time reverse the disastrous deterioration in the budget. The R500bn stimulus that the government talks about is nothing of the sort.
The credit guarantee scheme that was agreed with the banks was supposed to account for R200bn of that. From what we know so far, the take-up has been barely 1% of that. While this might not be on Wednesday’s budget, the government needs to move fast on this or risk large-scale business failures.
Mboweni could surprise with bold, out-of-the box thinking but is likely to be too risk-averse to consider something radical such as a cut in VAT to boost consumer spending. He surprised many in February by not raising taxes, recognising that this would be counterproductive in the context of collapsing demand. Could he go a step further and cut them?
The budget is likely to leave people on both ends of the ideological spectrum dissatisfied. For those on the left, the stimulus will be depressingly short, while others will bemoan the lack of a plan to bring down the debt load, not withstanding the short-term spending priorities imposed by Covid-19.
Ultimately, the main determinant of the country's success or otherwise will be its ability to implement the type of growth-boosting reforms that Mboweni has been championing since his return to government.
It's time for his reluctant party and allies to start listening.