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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

“My time at the UFS was the golden gem of my career”
2016-07-04

Description: Zig Gibson Tags: Zig Gibson

Prof Alan St Clair Gibson
Photo: Oteng Mpete

“My time at the University of the Free State (UFS) was the golden gem of my career. I have worked at medical schools or biomedical research centres in the United Kingdom, United States and at some of the top medical schools in South Africa, but working at the UFS was one of the highlights of my career,” says Prof Alan St Clair Gibson, Head of the UFS School of Medicine.

After spending just over two years at the UFS, Prof St Clair Gibson resigned from the institution in June 2016 and will take up the position of Dean: Health and Human Performance Sciences at the Waikato University in New Zealand in mid-July, where he will assist to establish a new faculty for all the health-science disciplines. “It was a privilege to work at the UFS. I come from a strong research background and wanted to grow research at the university, which I achieved. I came to the UFS because of the Academic and Human Projects and am proud of what has been achieved at the School of Medicine during the time I was here,” he said.

Prof St Clair Gibson highlighted some of these achievements, including the development of a management infrastructure across the disciplines of the school. “The establishment of an executive management committee for the school, as well as research champions in departments, highlighted the importance of proper governance and strategic management. By developing data dashboards, my management team and I could develop an understanding of research income and productivity, how the school works, what the role of teaching and learning is, and how the school could benefit in terms of third-stream income from the many contracts obtained by its academic staff. As a result, contracts and the financial management model of the school have also been reconfigured to the benefit of the university so that the institution and school can benefit from it,” he said.

His strong belief in an open-door policy has made staff feel part of the environment and it has created an atmosphere of equality and inclusivity. He believes in staff development and has, for instance, established leadership and management courses for heads of departments. Another factor to be proud of is the increase in the number of young researchers who recently joined the school, such as Prof Ross Tucker, who is one of the foremost sport scientists in the country. “It is a fact that staff retire or resign in all schools and departments of any university. It is also true that these departures offer opportunities to bring new academic and professional staff into the UFS. In fact, for the first time virtually every department in the School of Medicine now has a full-time Head of Department and 46 new staff were appointed since January 2015,” said Prof St Clair Gibson.

“I am especially proud of contributing, together with the senior leadership of the UFS, to stabilise the relationship with the Free State Department of Health (DoH). With the assistance of these parties, as well as my executive management team, we could find a better way of working together to the benefit of the school and the province.’’

Transforming the student profile to be representative of the country’s demographics is another milestone Prof St Clair Gibson will remember. “The intake of black and white students is of such a nature that we now have a much more balanced ratio of black and white undergraduate students than before.”

“I wanted to stay longer to see the effect of all the changes I made at the school, but the deanship is an offer I cannot refuse. I would have liked to see a steadier increase in the number of permanent clinical staff and have worked hard with both the UFS management and the DoH to try and achieve that; but more work needs to be done.”

I have worked with a number of fantastic staff members at the school, who are determined to do good in a challenging environment. I am amazed at the energy of the university leadership and how the Human and Academic Projects are executed. My wish for the university is to maintain and grow its standards and for the School of Medicine to maintain its reputation as one of the best schools in the country. I will always be a proud alumnus of the UFS,” he said.

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