Mboweni at budget crossroads
Tito Mboweni faces an unenviable balancing act in his mid-term budget statement Wednesday, trying to reconcile the need to take control of sky-high public debt with calls for more spending ahead of 2019 polls.
Mboweni, a fiscal conservative, is the country’s fifth finance minister in three years and will announce tax and spending plans amid unprecedented unemployment, a recession, shrinking tax income and ballooning debt.
“Poverty and unemployment remain painfully high and South Africans will want to be reassured that their pensions and social grant payments are secure and that government can be taken seriously in its commitment to stimulate growth and job creation for millions in need,” Kenneth Creamer, an economist with the University of the Witwatersrand said.
President Cyril Ramaphosa will be hoping that Mboweni’s stewardship of the listless economy will help the ANC rally support ahead of the 2019 polls.
Nhlanhla Nene — Mboweni’s predecessor — resigned in October when it was revealed that he had visited the controversial, corruption-accused Gupta business family several times during a previous stint in the finance brief.
The road ahead for Mboweni will be long and winding.
The economy slipped into a recession in the second quarter of 2018 having shrunk 0.7 percent quarter-on-quarter and voters have been buffeted by soaring fuel prices and a weak local currency.
Wednesday’s statement will update treasury forecasts for revenue collection and GDP growth initially given in February — and is likely to address the R50-billion stimulus package recently announced by Ramaphosa.
“Mboweni will have to continue with the objective of containing and stabilising South Africa’s debt,” Creamer added.
“A task that will be made easier if ongoing efforts to stimulate economic growth, investment and job creation prove to be effective.”
While some analysts do not expect anything dramatic, they agree that Mboweni’s “immense experience and gravitas” will hold a lot of clout.
But unions, which wield enormous influence over the ANC, are staunchly opposed to austerity policies or laying off government workers from the bloated civil service or ailing state-owned companies.
National Union of Mineworkers called Mboweni “unlawful and reckless” this week for saying that 30 000 job losses would be needed to save troubled state electric utility Eskom.
“You find that Tito Mboweni is actually not the favourite choice of trade unions… labour is not likely to support him,” University of Johannesburg’s politics professor Kwandiwe Kondlo said.
‘Job shedding growth’?
“Mboweni belongs to what was called the ‘1996 class’ project of Thabo Mbeki which believed in strict fiscal measures and a project that supported growth, employment and redistribution.
“[It] did see South Africa’s economy growing — but that was a job shedding growth.”
Peter Attard Montalto, head of capital markets research at Intellidex, said that whatever Mboweni announces could be superseded by political manoeuvering.
“We think there will be growing pressure from the Economic Freedom Fighters (EFF) into the ANC national executive committee that this is not a stimulus, there is no new money,” Montalto said, referring to the EFF.
“This dynamic will play into a key time of economic populism” ahead of polls, he added.
Montalto suggested pressure could mount to nationalise the central bank alongside acceleration of forced redistribution of land from wealthy white owners to poor black recipients.
Land reform is a flashpoint since Ramaphosa vowed to change the constitution to explicitly allow for expropriation of land without compensation to redress the inequalities of colonialism and apartheid.
In an unprecedented move, Mboweni has asked citizens on social media for tips on what they would like to see coming out of his debut mid-term budget.
Education, the public sector wage bill and the crisis in public health care are also among the key issues expected to be dealt with.
© Agence France-Presse