There were a number of positives to take away from Finance Minister Tito Mboweni’s 2020 Budget speech, but there were also many questions, a panel of speakers agreed during an analysis session held at the Wits Business School, on Thursday.
With the country’s poor debt-to-gross domestic product (GDP) outlook and slow growth over the past two years, the speakers emphasised that the economy was in desperate need of measures to reignite growth.
Steel and Engineering Industries Federation of Southern Africa (Seifsa) economist Marique Kruger said one positive in the Budget speech was the mention of seven guiding plans towards a turnaround economic strategy for the country.
She further commented that the Minister had made many comments that may enable the country to ward off a downgrade to junk status by Moody’s, such as an emphasis on structural reforms, fiscal responsibility and improving productivity, with these being enablers of economic growth.
In terms of Mboweni’s announcement of the formation of the South African Sovereign Wealth Fund, Kruger said the Minister did not clarify many elements of this, such as how it would be rolled out and managed, and what it aimed to achieve.
She called for a clearer framework to be made public.
This sentiment was echoed by 27four Investment Managers MD Fatima Vawda, who also posited that the country was not in a position to raise such funds, and that the formation of the fund seemed to be in the vein of political appeasement.
University of Pretoria Department of Political Sciences lecturer Dr Sithembile Mbete noted that the fund would require a legal framework to be implemented. She hypothesised that it would not be actioned within the next two to three years, with the Minister’s words implying a timeline of around four years.
Meanwhile, in terms of the embattled State-owned enterprises, government would first have to correct governance failures before these SOEs could be turned around, said South African Chamber of Commerce and Industry (Sacci) CEO Alan Mukoki.
With regard to South African Airways, it would be difficult to know exactly what was happening until the business rescue practitioners finalise their processes.
Former Finance Minister Nhlanhla Nene said that, while Mboweni had reiterated what was said during the President’s State of the Nation Address - that municipalities, households and businesses could generate their own electricity, the Budget speech had made no mention of what the financial loss to Eskom would be as a result of that.
He stated that the utility would probably be significantly impacted on by such losses in revenue.
In terms of cuts to public spending, Nene emphasised that in instances of cuts, importance should be placed on the quality of spending and consolidating resources where the best results could be achieved.
The planned wage bill cuts are considered to be a big political risk, given its impact on the African National Congress’ tripartite alliance partner, the Congress of South African Trade Unions.
Further, cuts to public transport expenditure would affect many citizens’ everyday lives, and this could lead to unrest.