EDITORIAL: The fix will be long, and slow
Mboweni was in a corner, in way that no other finance minister has been since democracy
It is a measure of how far SA has come, as it tries to get back on its feet, that it was finance minister Tito Mboweni who stood up in parliament this week to brief president Cyril Ramaphosa on the country’s finances — rather than the cartoon villains of previous years, like Malusi Gigaba, Des van Rooyen or Jacob Zuma.
At the same time, it’s a measure of just how hard that journey is that the best Mboweni had to offer SA during his maiden budget speech was some cosmetic signals, rather than any booming plan to miraculously produce 3% growth.
Those tweaks — like a freeze on MPs’ salaries and plans to cut the public service by 25,000 people, as well as some stern words for Eskom in exchange for a R69bn bailout — seemed admirable enough, if short of what some hoped.
It lays bare the essential fact that Mboweni was in a corner, in way that no other finance minister has been since democracy. It meant that Mboweni, a flashy guy known for his penchant for cigars, fine wine and fly-fishing, didn’t have any leeway for any firework surprises.
So, there were no merciful tax cuts, but nor were there any tax hikes; there was a lifeline for Eskom, but just enough to keep it solvent; and there was a tentative plan to sell a stake in one of Eskom’s three units.
Nedbank CEO Mike Brown is right in saying this budget was “always going to be a difficult set of compromises”. But Brown, the longest-serving bank CEO in the country, puts his finger on its central weakness: “What was lacking was specific detail of growth-enhancing reforms … the fiscal deficit is getting very, very close to where Moody’s will become uncomfortable.”
The cold numbers are, at best, uninspiring. At worst, it won’t be enough to stop Moody’s from joining the other two ratings agencies, Fitch and S&P, in dropping SA’s sovereign rating below investment grade to junk on March 29.
So, the National Treasury cut the government’s expectations of GDP growth from 1.7% to 1.5% for this year, it barely contained the debt-to-GDP ratio at 60%, and it said tax revenue would be R15.4bn lower than what Mboweni expected in October.
Perhaps more acutely, the budget deficit — the gap between the government’s spending and what it collects — is expected to hit 4.5% this year. True, it’s less than the 6.3% deficit of 2010, but at least then there were other levers to pull. Now, Mboweni is out of options.
Still, if the market reaction is anything to go by, Moody’s may stay the execution a bit longer. The rand inched just 0.2% lower against the dollar after the speech, while the JSE’s all share index dipped marginally from its earlier thumping highs, but still ended the day 0.9% higher.
Predictably, opposition parties didn’t like the budget— as you’d expect in an election year.
DA leader Mmusi Maimane called it a “lipstick budget”, which “made it look pretty on the outside, but frankly it did nothing”.
EFF leader Julius Malema said it was clear Mboweni had nothing to offer. “He just repeated exactly what he said in the past — there were no clear plans on job creation, no clear plans on land expropriation.”
Malema was also not enthusiastic about Mboweni’s most provocative statement: “Isn’t it about time the country asks the question: do we still need these state-owned enterprises? If we do, can we manage them better? If we don’t need them, what should we do?”
It is a valid question.
In the past, Mboweni himself has suggested that SA might as well close SAA, rather than sink more money into it. In the context of Eskom, his question implies the utility might do better in private hands — which seems rather obvious.
Again, the opposition parties responded predictably: Maimane was adamant that state-owned entities “must be sold”, while Malema said it was “an absolutely nonsensical question … we need those assets, those are strategic assets”.
Perhaps the sanest assessment of Mboweni’s performance came from UDM leader Bantu Holomisa, who said that while the budget might have seemed bland, it was actually quite bold in some respects.
“For the minister to talk about a public sector wage freeze [and] reducing the size of the public service in an election year — that in its own was very bold,” he said.
Which may be true. But you could also argue that by not giving Eskom, or other state-owned money pits like SAA everything they need to either become sustainable or shut down, it merely kicked the can down the road.
Eskom’s top brass, when interviewed after the budget, appeared deflated at not getting the R100bn they wanted.
Chair Jabu Mabuza said the budget “puts us under more pressure to deal with our operational costs and, indeed, our revenue enhancement”.
Which would suggest that Eskom will be pushing the National Energy Regulator of SA hard for higher tariffs from struggling consumers.
Eskom CEO Phakamani Hadebe described Mboweni’s extra R69bn as a “step in the right direction”.
As it is, Eskom is spending R40bn a year just in interest on its R420bn in debt. So, as Hadebe said: “What we’re going to get per year covers almost 70% of the debt costs.”
This is some reprieve, but hardly a silver bullet.
It illustrates the central point: the fix is long, and slow. And there is far less money to do it with.
Many of Mboweni’s fellow cabinet members also won’t be pleased with the meagre amounts he allotted them.
But then, as former British chancellor of the exchequer Nigel Lawson described the role of finance minister: “If I wasn’t incurring resentment among a number of the spending ministers, it would mean I wasn’t doing my job.”
In his speech, Mboweni said that when he delivered the medium-term budget policy statement in October, he quoted Charles Dickens’ A Tale of Two Cities, as he referred to “the best of times, and the worst of times”.
This week, he said: “After a few months in the role, I feel that Oliver Twist might be more appropriate this time. In short, ‘Please, Sir, may I have some more?’”
Let’s hope that his structural tweaks bear fruit, and that next year, Mboweni can invoke Great Expectations rather than Bleak House.