The Bureau for Economic Research (BER) says a heated debate is raging about the fiscal consolidation outlined in the supplementary budget tabled by Finance Minister Tito Mboweni on June 24.
"The debate ranges from vociferous critique against the planned spending cuts from 2021 to scepticism from rating agencies and some local analysts on whether the envisaged cuts could even be implemented.
"In the BER’s view, some of the critique directed against the National Treasury is misplaced as, for one, the fiscal relief package to support the economy in 2020 is being conflated with the need for fiscal consolidation once the economy is on a stronger footing.
The BER explains that the Treasury’s planned fiscal relief package is much less than the R500-billion announced by President Cyril Ramaphosa on April 21.
The BER questions “why some are only waking up to this now”, noting it as “odd” considering that from the start, “it was clear that the package would not inject a net R500-billion into the economy”.
Further, the BER notes that the well-published delays with distributing the temporary Covid-19 Social Relief of Distress grant for vulnerable people who do not qualify for an existing grant is not owing to Treasury keeping the purse strings tight.
“Rather, it is a function of wider government inefficiencies”, diluting its impact, which has been exacerbated by low uptake of the R200-billion loan guarantee scheme.
According to the BER, “the blame for this should not be laid at Treasury’s door”.
Nevertheless, the lack of public funds to do all sorts of things will remain contested terrain, the BER comments.
On July 3, a presentation by Treasury to Parliament showed that no further bailouts, other than settling guaranteed debt, will be forthcoming to the national airline South African Airways, South African Express and the State-owned diamond mine, Alexkor.
“While we support Treasury’s intention, this is likely to raise tension with the public enterprise ministry and the ANC,” the BER says.