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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 to investigate implementation of quality-monitoring system for SA food industry

2006-02-07

Some of the guests who attended the workshop were from the left Prof James du Preez (Chairperson: Department of Biotechnology at the UFS); Prof Lodewyk Kock (Head: South African Fryer Oil Initiative (SAFOI) at the UFS)); Mrs Ina Wilken (Chairperson: South African National Consumer Union (SANCU)); Prof Herman van Schalkwyk (Dean: Faculty of Natural and Agricultural Sciences at the UFS) and Mr Joe Hanekom (Managing Director of Agri Inspec).
Photo: Stephen Collet

UFS to investigate implementation of quality-monitoring system for SA food industry

The University of the Free State (UFS) will be investigating the implementation of a quality-monitoring service for the South African food industry.

This was decided during a workshop to discuss the external quality monitoring in the edible oil industry of South Africa, which was recently held at the UFS.

Major role players in the fast-food sector like Nando's, Spur, Captain
Dorego's, King Pie Holdings, Black Steer Holdings, etc and various oil
distributors like Felda Bridge Africa, Refill Oils, PSS Oils and Ilanga Oils attended
the workshop. Also present was Mrs Ina Wilken, Chairperson of the South African National Consumer Union (SANCU) and key-note speaker of this workshop. She represented the consumer.

These role players all pledged their support to the implementation of this quality- monitoring system for the whole food industry.

The decision to implement this system follows the various malpractices reported in the press and on TV concerning food adulteration (eg the recent Sudan Red Scare), misrepresentation (eg olive oil scandal exposed in 2001) and the misuse of edible frying oils by the fast-food sector.

“One of the basic rights of consumers is the right to safe food. Consumers must be protected against foods and food production processes which are hazardous to their health. Sufficient guarantee of the safety of all food products and food production processes should be implemented. It does not help to have adequate food standards and legislation and there is no manpower to do the necessary investigation or monitoring,” said Mrs Wilken.

The South African Fryer Oil Initiative (SAFOI), under the auspices of the UFS Department of Microbial, Biochemical and Food Biotechnology, currently monitors edible oils in the food industry and makes a seal of quality available to food distributors.

“Last week’s decision to implement the quality-monitoring system implies that we will now be involving also other departments in the UFS Faculty of Natural and Agricultural Sciences who are involved in various aspects of the food chain in an endeavor to implement this quality monitoring system,” said Prof Herman van Schalkwyk, Dean: Faculty of Natural and Agricultural Sciences at the UFS and one of the main speakers at the workshop.

Prof van Schalkwyk said that the main aim of such a system will be to improve the competitiveness of the South African food industry. “It is clear that the role players attending the workshop are serious about consumer service and that they agree that fraudulent practice should be monitored and corrected as far as possible. Although some of the food outlets have the capacity to monitor the quality of their food, it may not seem to the consumer that this is an objective process. The proposed external monitoring system would counteract this perception amongst consumers,” said Prof van Schalkwyk.

The workshop was also attended by representatives from SAFOI and Agri Inspec, a forensic investigation company collaborating with inter-state and government structures to combat fraud and international trade irregularities.

Agri Inspec has been working closely with SAFOI for a number of years to test the content of edible oils and fats. “Extensive monitoring and control actions have been executed in the edible oil industry during the past four years to ensure that the content and labeling of oil products are correct. Four years ago almost 90% of the samples taken indicated that the content differed from what is indicated on the label. This has changed and the test results currently show that 90% of the products tested are in order. However, to maintain this quality standard, it is necessary that quality monitoring and educational campaigns are continuously performed,” said Mr Joe Hanekom, Managing Director of Agri Inspec.

“The seal of quality presented by SAFOI should also be extended to include all the smaller oil containers used by households,” Mrs Wilken said.

The SAFOI seal of quality is currently displayed mainly on some oil brands packed in bigger 20 liter containers, which include sunflower oil, cottonseed oil, palm oil etc which are used by restaurants and fast food outlets. “Any oil type is eligible to display the seal when meeting certain standards of authenticity. In order to display the seal, the distributor must send a sample of each oil batch they receive from the manufacturer to SAFOI for testing for authenticity, ie that the container’s content matches the oil type described on the label. This is again double checked by Agri Inspec, which also draws samples countrywide from these certified brands from the end-user (restaurant or fast food outlets). If in breach, the seal must be removed from the faulty containers,” said Prof Lodewyk Kock, Head of SAFOI.

“It should however be taken into account that oils without a seal of quality from the UFS can still be of high quality and authentic. Other external laboratories equipped to perform effective authenticity tests may also be used in this respect,” said Prof Kock.

“It is also important to realise that any oil type of quality such as sunflower oil, cottonseed oil, palm oil etc can be used with great success in well controlled frying processes,” he said.

Further discussions will also be held with the Department of Health, the SA National Consumer Union and Agri Inspec to determine priority areas and to develop the most effective low-cost monitoring system.

More information on the UFS oil seal of quality and oil use can be obtained at www.uovs.ac.za/myoilguide

Media release
Issued by: Lacea Loader
Media Representative
Tel: (051) 401-2584
Cell: 083 645 2454
E-mail: loaderl.stg@mail.uovs.ac.za
6 February 2006

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