The upcoming Medium-Term Budget Policy Statement (MTBPS) must show that public spending can be “restrained within [South Africa’s] means” so as to avoid a “catastrophic collapse of public finances”, Business Leadership South Africa (BLSA) CEO Busi Mavuso warns.
In her weekly newsletter, published on October 12, she says the upcoming MTBPS “is the first real test of the credibility of government’s commitment to fix [the country’s] national finances”, and she laments that, should the MTBPS “fail to show it is on course”, it will accelerate financial collapse.
Finance Minister Tito Mboweni has previously said that, unless tough decisions are made, a fiscal crisis will hit South Africa by 2024/25, but Mavuso warns that “it could be even sooner than that”.
“Every businessperson knows the pain of cutting budgets. We also know it has to be done – however uncomfortable it is, unsustainable spending is worse. Across government, departments and agencies are having to make those difficult decisions,” she says in her newsletter.
“But the key issue is where to cut and where to spend. It is too blunt to merely set a targeted reduction and impose it across government. We have to choose wisely – what we can afford to do without and what we cannot afford to lose.”
Mavuso, however, is concerned about two institutions, namely the National Prosecuting Authority (NPA) and Statistics South Africa (StatsSA), which she says, “have publicly pointed to the consequences of budget cuts for them”.
At this stage of South Africa’s recovery from both from the Covid-19 crisis and the epidemic of corruption during the State capture era, these two institutions are important, Mavuso says, noting that “the NPA has to hit the reset button” to stem the corrupting of society.
“This is about justice, but it is also about economics. Without the rule of law, one cannot do business. The cost to all of our businesses as a result of corruption has been immense – investment that has not happened because of extortion attempts, infrastructure that doesn’t work because of shoddy work by corrupt contractors but, most importantly, an inability to plan because we cannot rely on enforcement of contracts.”
She emphasises that both the private and public sectors need to see that there are “serious consequences” for not playing by the rules that are set down for everyone by a democratically elected Parliament.
StatsSA also has a central role to play in South Africa’s recovery, she adds.
“As the old cliché goes, if you can’t measure it, you can’t manage it. And our economic recovery needs to be carefully measured so we know where to focus our efforts,” she explains, adding that according to a statement from Parliament, the statistics agency has not made new appointments since 2016 and has a growing vacancy rate.
Important research like the Poverty and Living Conditions Survey and Quarterly Labour Force Survey risk discontinuation, and Mavuso laments that “this would increase the difficulty of policy making for the country”.
On the other hand, government is attempting to find money to resuscitate South African Airways (SAA), where R10.4-billion is committed to the airline to cover the costs it has already incurred while in business rescue, but the objective is to find a whole lot more to finance the reopening of the airline.
Mavuso believes this to be “a waste of money” considering that SAA “delivers no social services or economic benefits that can’t be better done by a competitive airline industry”.
However, as government searches for other budget items to cut, she suggests rather that the question to guide government should be the value for money the public gets from the spending.
“That should be measured in the quality of services delivered to the public and the multiplier effects of the spending for the economy. Expenditure that has no clear link to the quality of services (expensive blue light brigades for politicians come to mind) or that which has no positive impact on the economy (like SAA) should be the first to go,” she says.