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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

Address by the first Inaugural President of the Central SRC

2005-08-03

The UFS Central SRC

Address by the first Inaugural President of the Central SRC of the University of the Free State, Mr Tello Motloung on Wednesday 3 August 2003

The Chairperson of the UFS Council, Judge Faan Hancke,
The Vice-chancellor and Rector of the UFS, Prof Frederick Fourie
The Vice-Rector Student Affairs of the UFS, Dr Ezekiel Moraka
The Presidents of the main campus SRC and the Vista campus SRC
Colleagues in the Central SRC, campus SRCs, students and fellow South Africans

Please receive my heartfelt revolutionary greetings

Vice-chancellor and rector what I bring here with me assisted by facts, is just the work of my imagination. Like a love letter addressed to a sweetheart miles away, even though you do not know how she feels, what she wants to hear, and do not even know what she looks like.

I value speech as just an honest intimation, that’s why I got into a habit of establishing a dialogue with people, looking at each other’s face, and persuading one another of what we are saying.

Vice-chancellor, today marks an important milestone in the history of the existence of the UFS. Today reflects the confidence and trust that students of the UFS have placed in us. They are confident that the Central SRC has both the will and the capacity to take our university forward as we confront the challenge of transformation.

Students are confident that they are correct to trust the Central SRC as the principal agent of change in our university that is genuinely committed to the objective of building a non-racial, non-sexist and democratic university. We need to frankly ask ourselves, as CSRC members, whether are we up to all these challenges?

All Central SRC members have to understand this fully, internalize it, and ensure that everything we do, does not betray the confidence and trust of students, or disappoint their expectations. I say this knowing that all Central SRC members have committed themselves to serve the students of the UFS, black and white, and no one among us (CSRC) needs any special lectures about this central commitment.

The UFS should be an omnibus, welcoming everybody on board. But we should be a bus with a clear direction. We will certainly lose our way if we, as an institution, don’t have a clear road map spelling out where we are heading to.

There should be clear guidelines on the role of students in the transformation process. Students should also be viewed as role players in transformation along with the University management, and not just opposing forces. There is no right time, other than this one, to move away from the politics of opposition to politics of transformation.

However, we need the support of management to do so. The University should value the role and contribution of student leaders, hear our legitimate claims and consider them as part of political and policy decision making.

Vice-chancellor and Rector, it remains our task to ensure that the UFS is transformed into an institution that is seen to be playing a vigilant role in developing students academically, intellectually, socially, culturally, politically and otherwise. The process of transformation is not ending tonight, it is just beginning tonight.

Judge Hancke, Prof Fourie, Dr Moraka, fellow students and fellow South Africans, I lead students at this university with a sense of pride and duty, and I know very well that I lead men and women, students who are all determined that we reach our destination safely and on time.

A navy divided within its ranks will be destroyed and vanquished by the enemy, but the navy united in purpose and action, loyalty and commitment will not sink but sail on to victory.

It is befitting to mention that every drop of my blood is telling me that the UFS is my home. I firstly became a student here, I became the SRC treasurer in my first year here, I became the deputy president here, and I became the first president of the Central SRC of the UFS.

Therefore you should never doubt my commitment towards the transformation of this university. To paraphrase what was said by students at another institution, “If there is no UFS in heaven, then I am not going.”

Let me conclude by thanking my ancestors for teaching me that even if I wined and dined with kings and queens, I am not a king myself, so I should not turn my back on people who made me what I am today.

Most importantly, I would like to thank the Almighty God and the grace of our Lord Jesus Christ for giving me time and power to lead this university.

It will be theoretically irresponsible if I ended my speech without indicating that “Only a Kovsie knows the feeling”.

I thank you.

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