Mboweni needs support for budget approach

Minister of Finance Tito Mboweni delivers his 2021 budget speech in parliament in Cape Town on February 24, 2021
Minister of Finance Tito Mboweni delivers his 2021 budget speech in parliament in Cape Town on February 24, 2021
Image: ESA ALEXANDER

Unsurprisingly, the acquisition of Covid-19 vaccines featured large in the budget unveiled by finance minister Tito Mboweni on Wednesday.

Despite a historically high deficit, the other major feature of the budget was that Mboweni stuck to his guns on structural reforms and spending cuts, notably reducing the public sector wage bill.

A rapid rollout of the vaccines is crucial to reviving economic activity and confidence.

However, the virus is not the sole cause for SA’s economic doldrums and it is ironic that the country’s most vulnerable citizens, who were hardest hit by the economic fallout from Covid-19, will now feel the pinch from the 2021 budget.

While largely friendly to business and the middle class, besides providing for an extension of the Covid-19 unemployment benefit, the budget gave mighty little to those dependent on government grants.

When inflation is taken into account, they will come out with less to spend.

Little wonder that civil rights organisations have criticised the budget as “failing to consider the economy from a human rights perspective”.

But Mboweni’s eyes are on the medium-term and restoring SA to a path of economic growth. This could in the longer term benefit all citizens.

For the minister’s plan to succeed, the government has to limit  borrowing, cut the absurdly bloated civil service wage bill and, critically, stimulate industry and commerce, with a major focus on job creation in the face of sky-high unemployment.

The planned public spending on infrastructure would be a good start in this regard.

While some have argued that the way to get SA out of its economic fix is to spend, that the country cannot keep on borrowing is evident from recent past experiences where spending consistently far exceeded the GDP.

Much depends on political will.

Mboweni needs the president and the rest of cabinet to stand behind his approach —  be it on the civil service or reforms — and to resist pressure from public sector unions and other interest groups, including factions within the ruling party.

Whether our leaders will find the backbone to do this, or indeed even to sing from the same sheet, remains to be seen.

 

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