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The Minister of Finance Enoch Godongwana’s budget speech offered a welcome but cautious narrative on the state of South Africa’s fiscal trajectory. The DA is, however, concerned that he did not go far enough to address the elephant in the room, the public sector wage bill, escalating costs of our national debt and precise detail on the State-Owned Enterprises (SOEs).

Public sector wage bill 

The Minister anticipates more salary increases for public sector workers arising from the new round of collective bargaining, which is expected to start in March 2022. This is in contrast to the DA position that there must be a salary freeze for non-Occupation Specific Dispensation staff. As long as the government keeps kicking the wage bill can down the road, the threat of a budget blowout will remain high. It is clear that ballooning state expenditure has been driven by wage demands in the public sector, and unions, as well as the Radical Economic Transfer-faction in the ANC, clearly will not allow the government space to contain this spiralling cost.

Debt spiral 

Despite painting a rosy picture of the government’s debt consolidation measures, it is alarming that debt continues to track upwards and will reach R4.35 trillion in 2021/22. This is enough to set alarm bells ringing but government continues to exhibit a lack of urgency, instead choosing to kick the debt can down the road. The Minister has not been bold in addressing non-priority spending within the state, a key requirement if we are to begin addressing the national debt crisis.

Unemployment and job creation 

Although we welcome the reduction in the corporate income tax, which the market had already factored in, GDP growth is still very low to support job creation and reduce unemployment. Projected average GDP growth of 1,8% over the next three years will not be enough to address South Africa’s high unemployment rate which reached 34,9% in the third quarter of 2021. While the DA supports temporary public employment initiatives to provide relief to the unemployed, they are not a sustainable approach to create permanent jobs in the economy.

Small business incentives - The Minister made a commitment, over the medium term, to devote attention towards cutting red tape for small businesses. However, he failed to provide specific details of how this will be achieved. The DA’s alternative budget made it clear that onerous BBBEE requirements were hampering competitiveness and limiting the SMME’s sector to create jobs. The Minister missed an opportunity to accelerate job creation in this sector by not including specific tax relief on startups in particular.

The DA welcomes the extension of the Social Relief Distress Grant for another 12 months. Vulnerable South Africans should not be made to shoulder the burden of government policy failure. We believe that effective growth enabling incentives can increase growth and revenue and the introduction of a conditional basic income grant.

State-Owned Enterprises still pose a fiscal risk

The failure by the government to provide a clear path for private sector involvement in the SOE sector continues to pose a financial risk to the fiscus. In this budget, it was made clear that the fiscal balance sheet continues to be exposed to significant financial guarantees and direct cash support to SOEs such as Denel, SAA and the Land Bank. As indicated in our Alternative Budget, the government should instead be readying SOEs for private sector investment to increase their competitiveness and profitability. We hope that the new Minister will impose strong conditions on existing bailouts to SOEs and depart from the soft conditions imposed by his predecessors

Conclusion 

The DA expected the Minister to provide a firm pathway towards fiscal discipline and economic growth. Instead, he opted for a cautious approach that does not go far enough to restore fiscal discipline and create jobs.

Issued by DA Shadow Minister of Finance, Dr Dion George MP