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29 June 2020 | Story Edward Kagiso Molefe and Dr Nico Keyser
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

Research into veld fires in grassland can now help with scientifically-grounded evidence
2015-04-10

While cattle and game farmers are rejoicing in the recent rains which large areas of the country received in the past growing season, an expert from the University of the Free State’s Department of Animal, Wildlife, and Grassland Sciences, says that much of the highly inflammable material now available could lead to large-scale veld fires this coming winter.

Prof Hennie Snyman, professor and  researcher in the Department of Animal, Wildlife, and Grassland Sciences, warns that cattle and game farmers should be aware, in good time, of this problem which is about to rear its head. He proposes that farmers must burn firebreaks as a precaution.

At present, Prof Snyman focuses his research on the impact of fire and burning on the functioning of the grassland ecosystem, especially in the drier grassland regions.

He says the impact of fire on the functioning of ecosystems in the ‘sour’ grassland areas of Southern Africa (which includes Kwazulu-Natal, Limpopo, Mpumalanga, the Eastern Cape, and the Harrismith environs) is already well established, but less information  is available for ‘sweet’ semi-arid grassland areas. According to Prof Snyman, there is no reason to burn grassland in this semi-arid area. Grazing by animals can be effectively used because of the high quality material without having to burn it off. In the sourer pasturage, fire may well form part of the functioning of the grassland ecosystem in view of the fact that a quality problem might develop after which the grass must rejuvenate by letting it burn.

Prof Snyman, who has already been busy with the research for ten years, says quantified data on the impact of fire on the soil and plants were not available previously for the semi-arid grassland areas. Fires start frequently because of lightning, carelessness, freak accidents, or damaged power lines, and farmers must be recompensed for this damage.

The shortage of proper research on the impact of fires on soil and plants has led to burnt areas not being withdrawn from grazing for long enough. The lack of information has also led to farmers, who have lost grazing to fires, not being compensated fairly or even being over-compensated.

“When above-and below-ground plant production, together with efficient water usage, is taken into account, burnt grassland requires at least two full growing seasons to recover completely.”       

Prof Snyman says farmers frequently make the mistake of allowing animals to graze on burnt grassland as soon as it begins to sprout, causing considerable damage to the plants.

“Plant roots are more sensitive to fire than the above-ground plant material. This is the reason why seasonal above-ground production losses from fire in the first growing season after the fire can amount to half of the unburnt veld. The ecosystem must first recover completely in order to be productive and sustainable again for the long term. The faster burnt veld is grazed again, the longer the ecosystem takes to recover completely, lengthening the problem with fodder shortages further.  

Prof Snyman feels that fire as a management tool in semi-arid grassland is questionable if there is no specific purpose for it, as it can increase ecological and financial risk management in the short term.

Prof Snyman says more research is needed to quantify the impact of runaway fires on both grassland plant productivity and soil properties in terms of different seasonal climatic variations.

“The current information may already serve as valuable guidelines regarding claims arising from unforeseen fires, which often amount to thousands of rand, and are sometimes based on unscientific evidence.”

Prof Snyman’s research findings have been used successfully as guidelines for compensation aspects in several court cases.

 

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