Godongwana has work cut out when he delivers 2022 budget
FINANCE Minister Enoch Godongwana will have his work cut out when he delivers his 2022/23 National Budget Speech on February 23 against the backdrop of a rising cost of living amid downward economic growth forecasts as he ponders on the country’s recovery.
At the top of the agenda will be the government’s efforts to shore up the poor against the adverse effects of the Covid-19 pandemic, while maintaining fiscal consolidation and reducing debt.
Covid-19 has wreaked havoc in terms of rising unemployment and increasing poverty levels as more than two million people lost their jobs at the height of the pandemic and its lockdown restrictions.
As a result, the ruling party in government has agreed to look into extending the monthly R350 Social Relief of Distress Grant, which currently provides a lifeline for about 10.3 million people, beyond the March 31 deadline.
Civic society organisations seem to have successfully lobbied the government for implementing a basic income grant and increasing the amount to at least the Food Poverty Line, which currently sits at R624 a month.
The R11.4 billion Covid-19 loan granted to South Africa by the World Bank last week has been earmarked to contribute to the government’s fiscal relief package and boost the recovery efforts. However, this comes at a time when South Africa’s economic growth prospects for 2022 have been revised downwards on the back of a softerthan-expected second half in 2021 and a weaker outlook for investment, as business sentiment remains subdued.
The International Monetary Fund (IMF) this week cut its 2022 growth forecasts for South Africa, saying it expected the economy to grow by 1.9 percent in 2022, down from 2.2 percent forecast in October.
The Medium-term Budget Policy Statement in November projected an average growth rate of 1.7 percent over the next three years. This week, renowned business leader Professor Bonang Mohale said: “Our challenge therefore as a country, is not only an economic one, but one concerning human resources and social justice.
“We need to ask ourselves how we can place ourselves in a strategic position so that when recovery is on the horizon, we are in a position to be competitive,” he said.
Godongwana’s budget speech will also have to confront the most serious issue of crippling inflation, which nears 6 percent on escalating prices of consumer goods.
Fuel prices have increased to record highs since December, due to a weaker exchange rate as well as the annual adjustment to wholesale and retail margins.
As a result, the cost of petrol increased to above R20 per litre in Gauteng in December before slowing in January, though high global oil prices could change this in February.
However, Pricewaterhousecoopers chief economist Lullu Krugel was optimistic about the country’s growth prospects, seeing that the government was considering doing away with the national state of disaster, which has been in place since March 2020.
Krugel says the fact that December closed – and January has continued – with no increase in lockdown rules suggests that South Africa has entered 2022 en route to a new post-lockdown era. “The post-lockdown economy’s key pandemic-related challenge is no longer domestic policies, but those abroad,” Krugel said.
“The severity of the mid-year and year-end waves, and the accompanying strictness of associated lockdowns, will play a significant role in shaping the nature of the economic recovery.
“Additionally, we also consider the adverse effect of ongoing electricity load-shedding and the lingering impacts of localised social unrest during July.”