ACCA: Positive steps from Tito Mboweni's budget speech should not be overlooked
SA is going to struggle to recover from lockdown, but government was already taking positive steps.
In his budget speech in February this year. Minister of Finance Tito Mboweni reiterated that a sound macroeconomic framework always lays the foundation for growth. He further outlined measures to reduce structurally high spending, reduce the public sector wage bill by over R160 billion in the medium term by imploring a more efficient public service and slowed hiring of employees, decisively dealing with wasteful expenditure and corruption and an “appropriate” monetary policy.
Despite the presentation by the Finance Minister of a budget widely deemed, among majority stakeholders, to be balanced while geared towards stimulation and recovery of the sluggish economy
- The finance minister allocated a staggering R309.5 billion spend in the budget to cater for social security funds, old age grants, child support grants and other grants. The minister indicated that South Africa is a caring society and currently has over 18 million receipts on the grant system and that this is important to reduce inequality and protect the vulnerable in society;
- Low growth rate a cause of concern. In fact, by March 2020 (post the budget speech, economic data indicated that economy is in a technical recession despite the indicated interventions and fact that the minister presented a well-balanced, economic growth centred budget;
- The 2020/21 budget also includes a R160.2 billion reduction in the wage bill of national and provisional departments over the next three years;
- Striving for faster economic growth through support of entrepreneurship and small businesses;
- Targeted measures to ensure fiscal stability and this will include, among other things, firm decision by the state and those in key positions to rein in extra budgetary pressures including reforms within state-owned enterprises as well as the Road Accident Fund;
- Effective implementation of the above measures is expected to narrow budget deficit from 6.8 percent to 5.7 percent over the next two years.
“The collective impact of these measures in the face of the economic challenges presented by social distancing and lockdown, and the relief measures that government has implemented, remains to be seen,” says Pat Semenya, head of ACCA South Africa. “However, it’s clear that government has economic stimulus firmly in its sights, so hopefully they will be able to do what’s right for the country, post-Covid-19.”