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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

African Student Affairs Conference a huge success

2011-05-24

Mr Rudi Buys, UFS Dean of Student Affairs, Mr. Folabi Obembe, Managing Director of Worldview International, Ms Birgit Schreiber, Director of the Centre for Student support services at the University of the Western Cape, Dr. Augustinah Duyilemi, Dean of Student Affairs at the Adekunleh Ajasin University in Nigeria, Dr. Christina Lunceford, assistant Director for the Centre for Research on Educational Access and Leadership at California State University in America, and Prof. Cecil Bodibe, student affairs veteran and consultant.
Photo: Earl Coetzee

The African Student Affairs Conference (ASAC), which took place on our Main Campus last week, was a major success, with two days of lectures and discussions and two pleasant social gatherings, where delegates had the opportunity to get to know each other.

The conference, hosted on African soil for the first time, and co-hosted by the University of the Western Cape (UWC), started on Wednesday 18 May 2011 with an informal welcoming session. Delegates got to meet each other and Mr Rudi Buys, UFS Dean of Student Affairs, explained the meaning of South African words like "kuier" and "lekker'.

The official start of events took place on Thursday 19 May 2011, in the Reitz Hall in our Centenary Complex. The conference was attended by delegates from universities across the continent and aimed to place the focus on issues relating to student affairs in an African context.

Delegates shared and exchanged strategies, ideas and resources, and discussed issues related to the work of student affairs professionals. The conference hoped to promote an exchange of best practice and assist attendees in identifying successful programmes.

Among the topics discussed on the first day, were “Constructing Post-Conflict Democracy on campus: a case study of transformation of student governance and political engagement as post-conflict intervention”, by Mr. Buys, and a discussion on ways in which social and online media can be used to ease the challenges of student interaction, development and support, by Ms Birgit Schreiber, Director of the Centre for Student Support Services at UWC.

A panel discussion, led by Mr Buys and several members of our Interim Student Council (ISC), discussed the specific challenges faced at the UFS. The importance of buy-in from role-players in decisions taken by University management in order to ensure their success, was discussed, using the UFS and our recent changes as an example.

The successful integration of residences on campus inevitably came under the spotlight and the recently resolved Reitz-saga was named as a catalyst in getting students less apathetic and more involved in attempts at creating racial and social harmony.

Dr Christina Lunceford, Assistant-Director of the Centre for Research on Educational Access and Leadership at California State University, presented a paper entitled A National Approach to Building Capacity in Student Affairs in South African Higher Education.

She commented on the fact that there is little or no philosophical framework or explicit theory that informs practice of student services in South Africa.

According to Dr Lunceford, student development should be a key concern for every department or unit within student services and emphasized the need for a centralized student development unit at each university.
She also touched on the need for institutions to implement support from international student affairs professional associations, professional development for student affairs practitioners, the utilization of technology to support professionals in the field, and working with international partners to explore future opportunities, as ways in which student affairs can be used to drive performance and change at universities.

The conference continued in the Scaena theatre on Friday 20 May 2011, with presentations by Dr Augustinah Duyileme, Dean of Student Affairs at Adekunle Ajasin University in Nigeria, and Prof. Bobby Mandew, Executive Director of Student Affairs at the University of Johannesburg (UJ).

Dr Duyileme presented a paper on the challenges faced by Nigerian universities with regard to student conflict and protests, which often turn violent, and how such violence can be curbed through proper planning and management.

Prof. Mandew presented a very well-received presentation on UJ’s successful off-campus housing initiative, which involves home-owners and business owners in the areas surrounding their campuses.

Their approach demonstrated how proper planning can prevent problems associated with over-population in private homes and conflict with neighbours of the university, usually related to an influx of students into residential neighbourhoods.

This problem is faced by many universities, as more and more students flock to universities on the continent and campus residents cannot accommodate them.

The conference came to a close on Friday, with most delegates agreeing that the exchange of knowledge which took place was extremely valuable.

Ms Deborah Lahlan, of Nigeria, said: “This is an important conference for Africa and it should become a regular event.”

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