Minister Mboweni accounts before appropriations and finance committees of Parliament

A delegation from national Treasury led by the Minister of Finance appeared before a joint meeting of the appropriations and finance committees of Parliament to brief them about the Budget Speech the minister delivered in the National Assembly (NA) the pr

Briefing the committees, Minister Mboweni cautioned the joint meeting that an illusion should not be created that this budget is geared towards economic growth. He said the 2021 budget is meant to support growth. “To give impetus to it, much more needs to be done by various sectors of the economy to bring about real economic growth that will create much-needed jobs.”

Mr Mboweni cited the R24.7 billion allocated to agriculture as a case in point. “This amount is not sufficient to unlock the value chain of our agricultural sector,” he said. “It’s just not enough for such a massive responsibility.”

South Africa’s economic growth rate forecast is below 2%, lower than that of other developing countries. In responding to a question about this at the joint meeting, the Deputy Director of Economic Policy, National Treasury, Mr Duncan Pieterse, said that the current growth projections are reasonable, despite the fact that “our forecast is stuck in low levels. There are constraints to our growth that keep it below 2%”.

The committees heard that there is no intention to raise tax, but rather to reduce tax instead. However, the national delegation said tax reduction is a matter

that needs to be debated to get various views on what would be an ideal tax framework that would be acceptable to various social and economic stakeholders. The delegation hinted that the National Treasury will also take into consideration the tax recommendations of the Dennis Davies Tax Commission.

Mr Floyd Shivambu told the National Treasury delegation that no economy would grow exponentially if it does not invest in its industrialisation strategy. In his view the only way to reduce debt is to expand the economy; fiscal consolidation will fail. The National Treasury didn’t respond to this view. Mr Shivambu also asked how did the National Treasury come up with the R10 billion projections for the vaccine rollout.

In response, the Deputy Director, National Treasury, Ms Mampho Modise, explained that the current R10 billion allocation on vaccines is based on an estimated model that took into consideration the R1 billion spent in securing the vaccines for the first phase of its rollout.

Mr Geordin Hill-Lewis highlighted the problem of the high public sector wage bill and asked the delegation about government’s plans to consider retrenchments in the public sector as a means to reduce the burden of the public sector wage bill on the national budget.

On plans to address high levels of poverty and destitution, given the fact that social grants have increased below the inflation rate, the response was that since 2012, social grants increases were in line with the inflation rate, but the government had to make a challenging balancing act of protecting the poor and implementing the need to consolidate the budget.

Mr Dion George, a committee Member, asked the delegation whether National Treasury would consider any future bailout for state-owned enterprises (SOEs), especially South African Airways (SAA). Minister Mboweni replied: “We had to bail out SAA because we were compelled by law to honour the business rescue obligations. Ideally, SOEs have to be self-sustainable in the future.”

He told the joint meeting of the committees that the government cannot force the private sector to invest. “What we can do is that we can create enabling conditions to invest. Private sector invests where it sees an opportunity. If they see a benefit, they will expand investment. Currently, there are constraints related to policy uncertainty. Currently, our policy environment is very bad. It does not encourage investment.”

The Chairperson of the Portfolio Committee on Finance,

Mr Joseph Maswanganyi, proclaimed that the imperatives of an inclusive economy must be dealt with. The economy cannot continue to serve the interests of one sector of our society at the expense of the other. “The recent statistics have shown that black youth, women and general population constitute the 32% of the unemployment rate in this country,” he said. “That is a grave concern that needs to be urgently addressed.”

He also decried the National Treasury’s protracted delay in the tabling of the Procurement Bill before Parliament. “We believe that this year the Bill will come before Parliament for processing because it can assist in addressing the issue of inclusive growth, if one considers that the government spends over R800 billion on procurement. If we can do a break down we can realise that black women, youth and small business enterprises get a marginal benefit from that.”

He further commented on the urgent need for an inclusive economy. “It’s estimated that 70% of the R500 billion stimulus package went to white companies. That cannot be ignored, it’s in fact a cause for concern. Hence, there is an urgent need for an inclusive economy.”