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27 Feb 2015 00:00
Minister of Finance Nhlanhla Nene. (David Harrison, M&G)
In his maiden budget, Finance Minister Nhlanhla Nene has done a fair job of trying to balance competing interests while fighting off requests from Eskom for money to buy diesel for two of its power plants, trying to impose some discipline on the other parastatals, and hopefully keeping the credit rating agencies at bay. But his budget speaks of tough times, limited choices and, with a growing interest bill, little or no cause for optimism.
Slowly but surely, South Africa’s finances are coming to resemble those of the head of state, a man who has been unable to manage his own financial needs.
He simply paid them no mind, relying on benefactors to pay his bills – or for the state to cough up on his behalf.
South Africa’s state-owned enterprises are a collective basket case and need R460-billion in guarantees from the state to keep them afloat.
Yet, despite South Africa having maxed out its credit, our president has brought his financial prowess to bear and appears to have done a nuclear deal (not even mentioned in Nene’s budget) with the Russians that will commit the country to paying Russia for this for decades to come. South Africa would also be on the hook for the guarantees we would have to issue. That means borrowing more money, probably on onerous terms, and the likelihood of an increasing financial mess.
Unfortunately, such a glaring policy disjuncture creates discomforting uncertainty for investors and leaves no room for fiscal manoeuvring by the finance minister. This makes South Africa less attractive as an investment destination and increases political risk. The already battling taxpayer will have to shoulder the burden and pay for bad policy decisions and lack of leadership at a crucial time.
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