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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

Prof. Letticia Moja a winner in her category

2004-08-17

Prof. Moja a finalist in award
'Every member of staff is important to me'

Michelle Cahill - Bloemnuus

IF you are in need of a dose of inspiration, try and get an appointment with Prof. Letticia Moja, the Dean of the Faculty of Health Science at the University of the Free State. It will not be easy as she has an extremely tight schedule, over and above being a finalist in the 2004 Shoprite/Checkers Woman of the Year competition.

Although not a born and bred Free Stater, this dynamic woman has come to love the Free State. "Once you get past the mindset of a small town and all the negatives surrounding it, it is an absolutely wonderful experience," Moja said.

Moja was born in Pretoria and grew up in Garankuwa as the second eldest of five children. "That was nothing special. I was not the eldest and I wasn't the youngest," she quipped. She had two younger brothers, one of whom died in a car accident and then two sisters.

She went to school in Pretoria and her first contact with the Free State was when she wrote her matric at Moroka High School in Thaba Nchu. "That was one of the best schools for us at that time," she says. After completing matric, she went on to study medicine in KwaZulu-Natal.

In 1982 she returned "home" and completed her internship at the Garankuwa Hospital. Hereafter she specialised in gynaecological obstetrics at Medunsa.

She became the head of the gynaecological obstetrics unit and later opened a branch in Pietersburg.

"This was just about the most heart-rending time of my life. You saw people travelling for up to three days just to see a doctor," she says. "Here we really interacted with the community."

In 2001 she was invited by the University of the Free State to apply for the job of vice-dean of the Faculty of Health Science. "I wasn't too keen," she says, "but they kept on calling to find out if I had applied or not," she says with a smile. "Eventually I gave in and was appointed."

She thought she would work a couple of years under Prof. Kerneels Nel, then the dean of the faculty. "Unfortunately that was not to be. I had hoped that I could learn from him," Moja says.

Prof. Nel died of a heart attack in 2003 after which Moja deputised for him before being appointed as dean.

"This brought along a whole newset of challenges," she says, "Now I have to work out budgets and I need to know what human resources are," she jokes. This has prompted her to take up her studies again and she is currently doing her MBA.

"It has certainly been a challenge to go into management and without my support structure I most certainly wouldn't have been able to do it," Moja says.

Moja is actively involved in her church and serves on various committees including the Health Professional Council where she is acting president of the Medical and Dental Board and the Provincial Aids Council.

To her no job is menial. She recalls when she used to have "high tea" with her staff in Gauteng and Limpopo. "One of the cleaning ladies used to think her job was menial. That is just not so. No hospital can do without even the lowest position. Imagine stepping over rubbish while you're trying to catch a baby. To me everybody is important no matter what you do. "

Moja's eldest daughter is studying for her B.Accounting degree at Wits . Her youngest daughter is in Gr. 9 at Eunice and she has also brought along her niece, who is in Gr. 8 at Eunice. "You see, we need to be three girls in the house."
She feels honoured to have been nominated by the institution especially as it is traditionally male-dominated. "It is not about me, but about the support structure. Nobody can do it on their own. It is a team effort."
BLOEMNUUS - VRYDAG 9 JULIE 2004

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