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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

UFS professor addresses genetically modified food in South Africa in inaugural lecture
2016-09-23

Description: Chris Viljoen inaugural lecture Tags: Chris Viljoen inaugural lecture

At the inaugural lecture were, from the left front,
Prof Lis Lange, Vice Rector: Academic;
Prof Chris Viljoen; Prof Gert van Zyl,
Dean: Faculty of Health Sciences; back: Prof Marius Coetzee,
Head of Department of Haematology and Cell Biology;
and Dr Lynette van der Merwe, Undergraduate
Programme Director.
Photo: Stephen Collett

The first genetically modified (GM) crops in South Africa were planted in 1998. Eighteen years later, the country is one of the largest producers of GM food in the world. Those in support of genetically modified crops say this process is the only way to feed a rapidly growing world population. But those who criticise GM food describe it as a threat to the environment and safety of the population. Who is right? According to Prof Chris Viljoen of the Department of Haematology and Cell Biology at the University of the Free State, neither position is well-founded.

GM crops play a vital role in food security

While GM crops have an important role to play in increasing food production, the technology is only part of the solution to providing sufficient food for a growing world population. The major genetically modified crops produced in the world include soybean, cotton, maize and canola. However, the authenticity of food labelling and the long-term safety of GM food are issues that consumers are concerned about.

Safety and labelling of GM food important in South Africa
In his inaugural lecture on the subject “Are you really going to eat that?” Prof Viljoen addressed the importance of the safety and labelling of GM food in the country. “In order for food to be sustainable, production needs to be economically and environmentally sustainable. On the other hand, food integrity, including food quality, authenticity and safety need to be ensured,” Prof Viljoen said. 

Labelling of food products for genetic modification was mandatory in South Africa, he went on to say. “It allows consumers the right of choice whether to eat genetically modified foods or not.” The Consumer Protection Act of 2008 requires food ingredients containing more than 5% of GM content to be labelled. 

GMO Testing Facility world leader in food diagnostic testing
In 1999, Prof Viljoen spearheaded research in developing a GM diagnostic testing platform, and in 2003, a commercial diagnostic platform for GM status certification, called the GMO Testing Facility, was founded. The facility is a licensed Eurofins GeneScan laboratory   a world leader in food diagnostic testing   and provides diagnostic detection and quantification of genetically modified organisms (GMOs) in grain and processed foods for the local and international market.

Molecular diagnostic technology the future of food integrity, authenticity and safety
With GM labelling now well-established in South Africa, the next challenge is to establish the use of molecular diagnostic technology to ensure that food integrity, including food authenticity and safety is maintained, said Prof Viljoen.

“To the question ‘Are you really going to eat that?’ the answer is ‘yes’, but let’s continue doing research to make sure that what we eat is safe and authentic.”

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