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29 June 2020 | Story Edward Kagiso Molefe and Dr Nico Keyser
Edward Kagiso Molefe, left, and Dr Nico Keyser.

The 2020 supplementary budget comes at a time when the ongoing COVID-19 pandemic is causing widespread disruption in the world’s economy and continues to affect it negatively. Even though the precise economic and social consequences of the pandemic still remain uncertain, there is prevalent agreement between economists and policy makers that it will leave the world overwrought with the uncertainties of the future. According to the International Monetary Fund, the world economy is expected to contract sharply by 5,2% this year, due to the huge lockdown to curtail the spread of the COVID-19 pandemic. The South African economy is also expected to contract by 7,2% in 2020, and according to the Minister of Finance, Tito Mboweni, this is the largest contraction in almost 90 years. Therefore, the South African government currently finds itself in an unfortunate and restricted fiscal position. Minister Mboweni does not have much room to move within his emergency budget and therefore calls for a pragmatic approach, the reprioritisation of expenditure, and the implementation of austerity measures within the public sector and its state-owned enterprises (SOE).

Zero-based budgeting
However, the country should be applauded for responding to this economic shock with a set of unmatched measures. The Minister further highlighted that, for the first time in history, all stakeholders – including the private sector, labour, communities, and the central bank – participated in responding to the storm that came without an early warning system. This has proven the validity of the long-sung gospel that by working together, we can do more. R500 billion of government’s COVID‐19 economic support package was directed straight at the problem. Against the background of ongoing measures to address the pandemic in South Africa, the Minister’s supplementary budget of 2020 stressed several key aspects:

The first burning issue addressed in the supplementary budget was the mounting debt-to-GDP ratio, which is envisaged to reach 80,5% in this fiscal year, as compared to a projection of 65,6% in February. Although the Minister has confirmed strategies to curtail the debt and widening deficit, no sign of stabilisation was presented. South Africa continues to experience contracting revenue and is relying extensively on loans from international sources, since savings is a non-starter. The Minister has also called for zero-based budgeting as one of the strategies in building a bridge to recover, and to close the mouth of the ‘hippopotamus’, which is eating our children’s inheritance. The zero-based budgeting is a big step in the right direction; it will make all role players in government understand the economic crisis we are facing. 

Prioritising infrastructure development
The other positive part of the supplementary budget was the prioritisation of infrastructure development. The South African government has already considered almost 177 infrastructure projects that will assist in boosting the economy and curtailing unemployment. The Sustainable Infrastructure Symposium, hosted by President Cyril Ramaphosa, announced 55 projects that are ready to be rolled out in due course. Government needs to further stimulate its partnership with the private sector to ensure more infrastructure development and job creation. Infrastructure development will also ensure jobs for the unskilled labour force, which makes up the largest part of our unemployment. 
In terms of job creation, an economic support package of R100 billion has been set aside for a multi-year, comprehensive response to our job emergency. Moreover, the President’s job creation and protection initiative will be rolled out over the medium term. This will include a repurposed public employment programme and a Presidential Youth Employment Intervention. The country is looking forward to further details regarding this presidential initiative, particularly with regard to the Presidential Youth Employment Intervention, as the youth is the future of this country.
Despite the envisaged revenue adjustment of R1,43 trillion to R1,12 trillion, the country is expected to continue spending. An additional R21 billion is allocated for COVID‐19‐related health-care spending. The supplementary budget has also proposed a R12,6 billion allocation to front-line services. An additional R11 billion is set aside towards improved water and sanitation, and an additional R6,1 billion for youth employment ensures that the most vulnerable are supported. However, the effectiveness of this allocation in the supplementary budget is sorely dependent on the ability of our government apparatus to spend the money.   

Opening the economy
The only worrying issue that the minister did not dwell on much, was the public sector wage bill, which still remains a challenge. According to the Minister, nearly half of the consolidated revenue will go towards the compensation of public service employees. The compensation of employees continues to put much pressure on service delivery and is pushing government in the direction of borrowing. On the other hand, the government of South Africa is still under pressure to implement the 2020 salary adjustments. However, the question still remains why the South African government is not considering the same process as the private sector or finding an alternative way of setting salaries at an appropriate, affordable, and fair level. This could save government money to focus on other areas that require financing, such as debt-service costs.

What remains evident and feasible is that South Africa should continue opening the economy to revive sectors hit hard by the great lockdown. Allowing trade to take place, doing business, and markets to function would provide the ultimate boost to a struggling economy. A reduced role by government could pave the way for the private sector to play a larger role in the economy. Moreover, structural reforms are required to create a favourable environment for growth and to restore South African fiscal credibility. 

Opinion article by Edward Kagiso Molefe, Lecturer: Department of Economics and Finance, and Dr Nico Keyser, Head of Department:  Economics and Finance

News Archive

UFS on energy-saving mode
2009-09-15

The University of the Free State (UFS) has undertaken several measures to reduce energy consumption on the Main Campus in Bloemfontein.

“Part of Eskom’s strategy is that all the main universities must reduce their electricity consumption. Because the university is the second biggest user of electricity in Bloemfontein we have to cut our consumption according to the new energy policy,” said Prof. Niel Viljoen, Chief Director of Operations at the UFS.

“Electricity is also expensive and if we look at global warming and everybody’s responsibility, I think we all have a moral obligation to save energy,” said Prof. Viljoen.

“The energy crisis of January 2008 and beyond, with its load-shedding limitations, was a major driver for the government to introduce the Power Conservation Scheme,” said Mr Anton Calitz, the UFS’s electrical engineer.

The measures put in place by the UFS include amongst others:

The introduction of a solar water-heating system in the residences, which is a first of its kind in Bloemfontein.
An investigation is also being launched into alternatives and the effective heating of rooms in the residences.

Feasibility studies are currently being conducted to determine whether energy saving can be achieved with radiation panels.

Energy-saving lights have been installed in the following buildings: the Architecture Building, Genmin Lectorium, Geology lecture halls, Winkie Direko Building, George du Toit Building, Sasol Library, Francois Retief Building, as well as in the residences. This measure has resulted in massive energy saving.

Energy meters for the Library, Computer Laboratory Building, François Retief Building and Steyn Substation are being planned as the first phase.

Real-time metering will result in every UFS computer user being aware of power consumption on the campus.

New lift motors and control systems that reduce energy consumption have been installed at the Agriculture and the George du Toit Buildings.

In the Computer Laboratory Building the temperature adjusting point for the venues is set at 22 °C and, in the case of new projects, green guidelines are applied.

It is expected that the government and local authorities will bring more pressure to bear on the UFS to save energy. Applications for increased capacity will possibly be linked to energy-saving targets.

This trend will continue until 2014 when additional power stations will be put into operation.

“Our aim is to save 10% on energy consumption,” said Prof. Viljoen.

“Heavy financial penalties will be imposed if a 10% saving is not achieved,” added Mr Calitz.

On average, our energy consumption per day this year is 128,964 kWh as compared to last year’s 119,752 kWh.

Media Release
Issued by: Mangaliso Radebe
Assistant Director: Media Liaison
Tel: 051 401 2828
Cell: 078 460 3320
E-mail: radebemt.stg@ufs.ac.za  
14 September 2009

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