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2020 supplementary budget: The road map to the revival of the economy

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

Molefe and Kesyer_web read more — 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 breakthrough on SRC

2005-06-10

The Council of the University of the Free State (UFS) today unanimously approved the establishment of a Central Student Representative Council (CSRC) to ensure the democratic participation of students at its three campuses in the governance of the university.

In a major breakthrough and transformation step for student governance, the Central SRC will include representatives of the main campus in Bloemfontein, the Vista campus and the Qwaqwa campus of the UFS.

The establishment of the Central SRC follows the incorporation of the Qwaqwa campus into the UFS in January 2003 and the incorporation of the Vista campus in Bloemfontein into the UFS in January 2004.

According to Dr Ezekiel Moraka, Vice-Rector: Student Affairs, today’s decision of Council is the result of a lengthy, negotiated agreement between the three campuses. Independent experts facilitated part of the process.

With the establishment of a Central SRC, the UFS has adopted a federal student governance model whereby the CSRC is the highest representative student body on matters of common concern for all students.

However, the three campuses of the UFS will retain autonomous SRC structures for each campus with powers and responsibilities for matters affecting the particular campus.

This arrangement will be reviewed after a year to make allowance for the phasing out of students at the Vista campus, as was agreed in the negotiations preceding the incorporation of that campus into the UFS.

The central SRC will have a maximum of 12 members made up of members of the campus SRCs, including the presidents of these three SRCs. In total, the main campus will have 5 representatives, the Qwaqwa campus will have 4 representatives and the Vista campus will have 3 representatives.

From these 12 members a central SRC president will be chosen on a quarterly basis to represent the general student body at Executive Management, Senate and Council.

In another key decision and significant step forward affecting student governance, the Council also approved amendments the constitution of the Student Representative Council (SRC) of the main campus. These amendments were the results of deliberations of student organizations, the SRC and the Student Parliament of the UFS main campus.

The amendments to the constitution of the main campus SRC determines that nine of the 18 SRC members must be elected by means of proportional representation and nine on the basis of an individual, first-past-the-post election.

This decision comes in the wake of calls by certain student organizations on main campus for proportional representation to be included as a means of electing student representatives.

The following portfolios of the main campus SRC will be contested by individual candidates on the basis of first past the post:

president
secretary
academic affairs
legal and constitutional affairs
student development
arts and culture
men’s internal liaison
ladies internal liaison
media, marketing and liaison

The following nine portfolios will be contested by affiliated organizations on a proportional representation basis.

two vice-presidents
treasurerdialogue and associations
transformation
campus affairs and recreation
sport
international affairs
community service

It also is a breakthrough to have all constitutional changes processed and approved at the June meeting of the Council, with all relevant student organizations having been part of the process and accepting the outcome of the process.

According to the chairperson of the UFS Council, Judge Faan Hancke, today’s unanimous decisions on student governance are an indication of how all UFS stakeholders represented in Council are committed to finding win-win solutions in the interest of the university.

“Once again the UFS has reached another milestone in its transformation and has shown the rest of the country that we are pioneers in the field of reaching intelligent solutions to complex situations,” Judge Hancke said.

According to Dr Moraka, the central SRC constitution will come into effect from the start of the second semester this year.

MEDIA RELEASE

Issued by: Lacea Loader
    Media Representative
    Tel: (051) 401-2584
    Cell: 083 645 2454
     E-mail: loaderl.stg@mail.uovs.ac.za

10 June 2005

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