Learn from me and stick to your budgets, was the clear message from the finance minister in his budget address to media this year, as he introduced the first surplus the government has ever run.
The budget balance is expected to show a R5 billion surplus on a budget of R470 billion, just more than 1%. It’s far better than the average household savings rate, which as a percentage of disposable income has actually turned negative. Most South African households are running a deficit, giving rise to concerns about spending this year.
The tone was set by Reserve Bank Governor Tito Mboweni, who addressed the media’s glumness over the limited tax relief. “There is too much money” he stated, saying some fiscal contraction was necessary. While Mboweni’s views on our overspending are well known, we were left in no doubt about treasury’s concerns about exuberant consumption. Comments in the budget review made it quite clear that rampant consumer spending made treasury less inclined to offer excessive tax relief, with this year’s personal taxes not coming down at the same rates as in previous budgets. Our spending habits are also playing havoc with the current-account deficit — we are buying too many Chinese goodies. In his Parliament address, Manuel asked consumers to follow his lead and use the tax relief to pay off debt or save — not spend. By saying no to the proliferation of credit cards, perhaps the government will reward us and give us back a little more, next time round.
But it was sobering to hear Manuel compare South Africa to Zimbabwe and Argentina — their borrowing of excessive amounts of money to fund social spending ultimately led to the collapse of their economies. Used as an example to show the prudence in delaying massive social expenditure in South Africa, it provides valid reasons to stick to your budget.
Overall, Manuel was clearly proud of what he and his team have achieved in terms of fiscal discipline, which allows for constructive spending in the future. “We have a good story to tell,” he said, and so we do.