/ 28 October 2022

Editorial: Mini-budget makes big promises

Budget Speech Godongwana City Hall Dh 1267
Finance Minister Enoch Godongwana. (David Harrison/M&G)

Finance Minister Enoch Godongwana has become somewhat of a hitmaker on the fiscal front.

In February, he delivered the welcome news that the tough years of budget cuts would come to a close. And on Wednesday, in the medium-term budget policy statement, he said the treasury has been able to stabilise debt two years ahead of schedule.

By the end of 2023, government revenue will exceed spending for the first time in 15 years, the treasury said. If the policy statement sticks to its promise and delivers a budget surplus by 2023-24, it would impress ratings agencies, which have been sceptical of the government’s ability to stick to its guns amid mounting political pressure. 

Godongwana is closer to achieving what his predecessor couldn’t: investment grade status for the country.

Many would argue that there haven’t been many other positive upshots to fiscal consolidation, the policy used to contain the budget deficit and slow the pace of debt accumulation. The minister’s detractors have warned that the contortions the budget would have to go through to achieve a surplus would leave us worse off.

Today, this view is difficult to dispute. Many of us — other than, perhaps, the mine bosses — feel worse off than we did before Godongwana took the reins. And ratepayers are paying for services they don’t get at a time when they need their money the most.

For this reason, a healthier public purse means very little, at least until we start seeing the promised fruits of fiscal consolidation. 

For the average South African, this promise seems far from being realised. And it is clear that there is not much more we can endure.

Extending the R350 social relief of distress grant for another year will help. With high inflation choking households, it seems the government had little choice in the matter. Not extending the grant could mean risking another bout of economy-battering unrest ahead of the national elections in 2024.

But, even in providing this relief, there are trade-offs. In the cost-of-living crisis, R350 will buy a lot less than it did when it was first introduced in 2020. Moreover, to pay for the continued R350 grant, other grant beneficiaries will receive lower-than-inflation increases next year.

So the policy statement signals no major victory for consumers.

The finance minister and his team seem fairly certain that the country is inching towards better times. 

More money can go to infrastructure, which would help to boost economic growth. A functioning Eskom and Transnet would go a long way in securing the gains of fiscal consolidation by improving growth.

But how well this money is spent — and whether growth can be achieved after more than a decade of stagnation — remains to be seen. 

The policy statement is just a promise. And, if history is anything to go by, promises are made to be broken.