Godongwana hints at action on the economic front, but is frugal with the details
Finance Minister Enoch Godongwana, in his first parliamentary Q&A, signalled that a shift to capital spending from consumption would be detailed in the Medium-Term Budget Policy Statement (MTBPS). As would measures on what could replace or supplement the R350 Covid-19 grant.
“All options also need to be considered with regards to their affordability before a final decision can be made,” said Godongwana during the Q&A of economics ministers on 8 September.
And that’s about as good as it got on details, even as Godongwana aced the politics. The MTBPS is scheduled for 2 November, the day after the local government elections.
South Africa’s 1.2% gross domestic product (GDP) second-quarter increase from April to end-June 2021 is slightly up from the 1% increase of the previous quarter, and Mineral Resources and Energy Minister Gwede Mantashe highlighted how energy and gas had positively contributed this time round.
But that GDP sliver of an upward shift is expected to reverse itself in third-quarter GDP numbers, which will include the effects of July’s public violence and looting.
Ditto the ever-worsening jobless numbers. A further deterioration is expected from an already dismal 44.4% unemployment on the expanded definition that includes those too discouraged to look for work, and youth unemployment at 64.4%.
The latest GDP figures, released by Stats SA on 7 September, also indicate a slowdown in the commodity boom.
It was a commodity tax windfall that underpinned the additional release of more than R32-billion from the national revenue fund to, among others, inject R3.9-billion to the government-owned insurer Sasria to help meet claims from July’s public violence and looting.
MPs were told that R2.8-billion was paid by Sasria for damages caused by the July pubic disorder. The government has reintroduced R350 Covid-19 social relief of social distress grant (for which about 12 million people had apparently applied). Also available are support measures for uninsured small businesses affected by the July public disorder.
The Second Special Appropriation Bill to approve these extra monies is in Parliament.
Godongwana snappily sidestepped questions about the cost of the July unrest. It was too early to give definitive numbers, as only a month had passed, he said.
He then provided National Treasury information that was presented to the Select Committee on Finance in the National Council of Provinces on 24 August, such as R50-billion being the consensus number on damages and that almost one percentage point had been shaved off 2021’s GDP.
Godongwana proved his political nous. Answers were brief and factual – and short shrift was given to opposition barbs on cadre deployment and ANC tenderpreneurs, delighting ANC benches.
But the reiteration that the Treasury would be doing its bit for economic growth, accelerating the implementation of the government’s Recovery Plan as well as ensuring more effective and efficient spending, served to sidestep any meaningful details.
By providing dull rhetorical repeats with a dollop of hope, Godongwana placed himself in the same corner, economically, as President Cyril Ramaphosa.
The recent presidential Q&A in the House contained many hints: work is under way on “further measures” to reverse joblessness and to boost growth on the economic front.
“We will be articulating this in time to come,” Ramaphosa said on 3 September.
The President also hinted at possible changes to the banking sector’s facilitated R200-billion loan scheme that was part of the government’s announced R500-billion Covid-19 lockdown support, but has seen paltry take-up.
“I want to see this scheme recast and recalibrated. I have told the financial sector I am not happy about this.”
However, his hint that the much delayed and now litigated spectrum auction would be resolved this month seems to be rearing off course towards 2022.
The Independent Communications Authority of SA (Icasa), according to Business Maverick, has filed a consent order in court, agreeing to set aside its Invitations to Apply, which triggered legal challenges by Telkom and MTN, in an effort to reach agreement for a spectrum auction in January 2022.
The release of broadband is needed for the migration from analogue to digital – South Africa missed the international deadline to switch – and to widen internet access. It is part of the central structural reforms, as the government usually puts it, “to ignite economic growth and recovery”.
Although the Icasa consent order signals delays, Communications and Digital Technologies Minister Khumbudzo Ntshavheni said on 8 September she was encouraged by the parties’ attitude on processes “that are beneficial towards our national interest.
“The decision by Icasa does not detract from the engagements the minister continues to hold with the telecommunications mobile operators and other relevant parties to find an amicable solution towards an urgent release of the spectrum.”
Later, during the economic ministers’ Q&A, Ntshavheni told MPs they should call Icasa to explain its decision. Her ministry, she said, would continue pursuing Open Access Network to ensure delivery of cheaper data for the poor.
“We are confident [that] within the month of October we can go to Cabinet with a proposal on Open Access Network … and we can declare a percentage of data that can go to each household,” she said.
A spectrum auction in January 2022, however, is about two years behind the initially targeted December 2020 date – signalling not only the slow pace of policy reform and implementation, but also incapacity and inability in government, regulators and the public service.
Another of the government’s central structural reforms to facilitate skilled immigration is at the policy, regulatory and framework review stage. It’s scheduled to be completed with recommendations at the end of October. A list of scarce skills is expected on 17 September.
Those hints of action were also evident when, as ANC president, Ramaphosa opened the weekend’s governing party National Executive Committee lekgotla on 4 September.
The Economic Reconstruction and Recovery Plan was being implemented, but “must be supplemented by further targeted measures if we want to make decisive progress in addressing poverty and unemployment”.
Ramaphosa contextualised hints of economic policy action with comparisons to advanced economies shifting “from a conservative, neoliberal approach towards the encouragement of fiscal spending”, or a shift from corporate tax cuts to increases.