Tough Budget under difficult circumstances
Minister did his best, strong feeling that SA will avoid a downgrade
THE MEDIUM Term Budget Policy statement last year was a shock to the system – spiralling debt, state-owned enterprises out of control and falling tax revenue. After a refreshing State of the Nation Address all eyes were on the Minister of Finance Tito Mboweni to back up the Sona. And judging by the reaction, the minister and the National Treasury did the best they could under the circumstances.
Here are some of the takeaways: The projections on debt to GDP did come down somewhat but remained high.
Debt in principle is not a problem, however the economy needs to be growing for us to keep sustaining debt.
Is this the last bailout to SAA? Details are sketchy on the R16 billion to SAA but my feeling is that it is to be used to clear debt and put the airline on a sustainable path.
If you wanted any reason to stop these bailouts it’s that we cut spending on transport infrastructure in historically disadvantaged areas to again bail out our troubled airline.
It’s just unethical.
The public sector wage management is ambitious.
It’s odd to think that it would be in the Budget without any sort of pre-negotiations. Time will tell on whether these savings can be realised.
The minor tax cuts were unexpected and good. They will introduce some much-needed stimulus to the economy.
The R100bn in expenditure cuts should be the saving grace to avoid a downgrade. It indicates a real willingness to tighten the belt and sends a good signal to the market.
Before we jump too high, we again need to debate the ethics of these cuts. They are allocated mostly to health, education and transport.
And what about what wasn’t in the Budget.
I did not see too much around the National Health Insurance.
What does this say about the implementation of universal healthcare? And besides SAA, Eskom and the Road Accident Fund, there wasn’t too much else in respect of state-owned enterprises.
Tentatively I might say that these others, have in the new administration been set on a better path.
The minister also backed the Presidential Youth Employment Intervention
in the Budget speech. It shows real willingness on the part of government to respond to a national crisis.
It was a really tough Budget under really difficult circumstances. And that is without factoring in the impact that the coronavirus is going to have on the global economy.
I think we did the best we could and my gut feeling is we will avoid a downgrade. Our chances to get this right are however running out fast.