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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

Inaugural lecture: Prof Robert Bragg, Dept. of Microbial, Biochemical and Food Biotechnology

2006-05-17

Attending the inaugural lecture were in front from the left Prof Robert Bragg (lecturer at the Department of Microbial, Biochemical and Food Biotechnology) and Frederick Fourie (Rector and Vice-Chancellor). At the back from the left were Prof James du Preez (Departmental Chairperson: Department of Microbial, Biochemical and Food Biotechnology) and Prof Herman van Schalkwyk (Dean: Faculty of Natural and Agricultural Sciences). Photo: Stephen Collett

A summary of an inaugural lecture delivered by Prof Robert Bragg at the University of the Free State:

CONTROL OF INFECTIOUS AVIAN DISEASES – LESSONS FOR MAN?

Prof Robert R Bragg
Department of Microbial, Biochemical and Food Biotechnology
University of the Free State

“Many of the lessons learnt in disease control in poultry will have application on human medicine,” said Prof Robert Bragg, lecturer at the University of the Free State’s (UFS) Department of Microbial, Biochemical and Food Biotechnology during his inaugural lecture.

Prof Bragg said the development of vaccines remains the main stay of disease control in humans as well as in avian species. Disease control can not rely on vaccination alone and other disease-control options must be examined.

“With the increasing problems of antibiotic resistance, the use of disinfection and bio security are becoming more important,” he said.

“Avian influenza (AI) is an example of a disease which can spread from birds to humans. Hopefully this virus will not develop human to human transmission,” said Prof Bragg.

According to Prof Bragg, South Africa is not on the migration route of water birds, which are the main transmitters of AI. “This makes South Africa one of the countries less likely to get the disease,” he said.

If the AI virus does develop human to human transmission, it could make the 1918 flu pandemic pale into insignificance. During the 1918 flu pandemic, the virus had a mortality rate of only 3%, yet more than 50 million people died.

Although the AI virus has not developed human-to-human transmission, all human cases have been related to direct contact with infected birds. The mortality rate in humans who have contracted this virus is 67%.

“Apart from the obvious fears for the human population, this virus is a very serious poultry pathogen and can cause 100% mortality in poultry populations. Poultry meat and egg production is the staple protein source in most countries around the world. The virus is currently devastating the poultry industry world-wide,” said Prof Bragg.

Prof Bragg’s research activities on avian diseases started off with the investigation of diseases in poultry. “The average life cycle of a broiler chicken is 42 days. After this short time, they are slaughtered. As a result of the short generation time in poultry, one can observe changes in microbial populations as a result of the use of vaccines, antibiotics and disinfectants,” said Prof Bragg.

“Much of my research effort has been directed towards the control of infectious coryza in layers, which is caused by the bacterium Avibacterium paragallinarum. This disease is a type of sinusitis in the layer chickens and can cause a drop in egg product of up to 40%,” said Prof Bragg.

The vaccines used around the world in an attempt to control this disease are all inactivated vaccines. One of the most important points is the selection of the correct strains of the bacterium to use in the vaccine.

Prof Bragg established that in South Africa, there are four different serovars of the bacterium and one of these, the serovar C-3 strain, was believed to be unique to Southern Africa. He also recently discovered this serovar for the first time in Israel, thus indicating that this serovar might have a wider distribution than originally believed.

Vaccines used in this country did not contain this serovar. Prof Bragg established that the long term use of vaccines not containing the local South African strain resulted in a shift in the population distribution of the pathogen.

Prof Bragg’s research activities also include disease control in parrots and pigeons. “One of the main research projects in my group is on the disease in parrots caused by the circovirus Beak and Feather Disease virus. This virus causes serious problems in the parrot breeding industry in this country. This virus is also threatening the highly endangered and endemic Cape Parrot,” said Prof Bragg.

Prof Bragg’s research group is currently working on the development of a DNA vaccine which will assist in the control of the disease, not only in the parrot breeding industry, but also to help the highly endangered Cape Parrot in its battle for survival.

“Not all of our research efforts are directed towards infectious coryza or the Beak and Feather Disease virus. One of my Masters students is currently investigating the cell receptors involved in the binding of Newcastle Disease virus to cancerous cells and normal cells of humans. This work will also eventually lead to a possible treatment of cancer in humans and will assist with the development of a recombinant vaccine for Newcastle disease virus,” said Prof Bragg.

We are also currently investigating an “unknown” virus which causes disease problems in poultry in the Western Cape,” said Prof Bragg.

“Although disinfection has been extensively used in the poultry industry, it has only been done at the pre-placement stage. In other words, disinfectants are used before the birds are placed into the house. Once the birds are placed, all use of disinfectants stops,” said Prof Bragg.

“Disinfection and bio security can be seen as the ‘Cinderella’ of disease control in poultry. This is also true for human medicine. One just has to look at the high numbers of people who die from hospital-acquired infections to realise that disinfection is not a concept which is really clear in human health care,” said Prof Bragg.

Much research has been done in the control of diseases through vaccination and through the use of antibiotics. “These pillars of disease control are, however, starting to crumble and more effort is needed on disinfection and bio security,” said Prof Bragg.

Prof Bragg has been working in close co-operation with a chemical manufacturing company in Stellenbosch to develop a unique disinfectant which his highly effective yet not toxic to the birds.

As a result of this unique product, he has developed the continual disinfection program for use in poultry. In this program the disinfectant is used throughout the production cycle of the birds. It is also used to ensure that there is excellent pre-placement disinfection.

“The program is extensively used for the control of infectious diseases in the parrot-breeding industry in South Africa and the product has been registered in 15 countries around the world with registration in the USA in the final process,” said Prof Bragg.

“Although the problem of plasmid mediated resistance to disinfectants is starting to rear its ugly head, this has allowed for the opening of a new research field which my group will hopefully exploit in the near future,” he said.

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