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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

New challenges for animal science discussed

2006-04-04

Some of the guests attending the congress were from the left Dr Heinz Meissner (honorary president of the South African Society for Animal Science (SASAS) and senior manager at the Animal Production Institute of the Agricultural Research Council), Mr Paul Bevan (President of SASAS) and Prof Magda Fourie (Vice-Rector: Academic Planning at the UFS).
Photo: Lacea Loader

New challenges for animal science discussed

The South African Society for Animal Science (SASAS) is presenting its 41st Congress at the University of the Free State’s (UFS) Main Campus in Bloemfontein.

The congress started yesterday and will run until Thursday 6 April 2006. The theme is New challenges for the animal science industries.

It is one of the largest congresses in the 45 years since SASAS was founded in 1961. Among the delegates 12 African countries are represented, with the biggest delegation from Kenya. Delegates are also from the United States of America, Iran, Turkey, Germany, the Netherlands and Portugal and African countries like Zimbabwe, Mozambique and Botswana.

“Many of our members play an important role in the training of animal scientists at universities. The congress is specifically industry orientated so that scientists can interact with farmers through the respective producer organisations,” said Prof HO de Waal, Chairperson of the organising committee and lecturer at the UFS Department of Animal, Wildlife and Grassland Sciences.

According to Dr Heinz Meissner, honorary president of SASAS and a senior manager at the Animal Production Institute of the Agricultural Research Council, the National Livestock Strategy (NLS) Plan clarifies the role and responsibility of the livestock sector.

“Through this strategy we need to focus on enhancing equitable access and participation in livestock agriculture, improve global competitiveness and profitability of the livestock sector and ensure that the ventures implemented do not over utilise our resources,” said Dr Meissner.

In her welcoming address, Prof Magda Fourie, Vice-Rector: Academic Planning at the UFS highlighted the related challenges that the UFS will be focusing on specifically over the next five years. “We have identified five strategic clusters that represent broad areas of excellence in research and post-graduate education. Two of these are food production, quality and safety for Africa and sustainable development,” she said.

“The food safety and security cluster will focus on the production of food in all its varieties within the African context, encompassing the entire value chain – from production to consumption and nutrition related issues. This would include a strong emphasis on sustainable production systems,” she said.

According to Prof Fourie the rural development cluster will engage in questions around the role of higher education in sustainable development. “One of the focus areas in this strategic cluster pertains to sustainable livelihoods. It refers to a way of approaching development that incorporates all aspects of human livelihoods and means by which people obtain them,” she said.

Prof Fourie said that the challenges we are facing such as food production can only be effectively addressed through collaborative efforts. “That is why it is important that collaboration takes place between different scientific disciplines, researchers, institutions and countries who are confronted with similar difficulties,” she said.

According to Prof de Waal the congress will give key role players a unique opportunity to present a profile of what they perceive an animal scientist should be and state their specific requirement regarding the animal sciences and its applications.

“In this way we can determine what the industry’s needs are and we can re-align our curriculum to suit these needs,” said Prof de Waal.

During the next two days, various areas of interest will be discussed. This includes ruminant and monogastric nutrition, animal physiology, beef, dairy, sheep and ostrich breeding and sustainable farming covering the range from commercial to the small-scale farming level.

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

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