Latest News Archive

Please select Category, Year, and then Month to display items
Previous Archive
20 February 2025 Photo Supplied
Prof Johan Coetzee
Prof Johan Coetzee, Chairperson: Department of Economics and Finance, University of the Free State.

Opinion article by Prof Johan Coetzee (MCBI, CMBE), Chairperson: Department of Economics and Finance, University of the Free State.

The Minister of Finance has not had it easy in 2025 and the budget speech not read yesterday pays testament to this. Postponing the speech to 12 March is unprecedented, and is due to the Government of National Unity (GNU) not reaching consensus on a way forward to tabling a budget. It seems as if the fallout was based largely on a proposed 2% increase to VAT that was rejected by two parties. I personally would not have supported this proposal either as the tax burden shifts disproportionally to the poor.

My initial response of the postponement was frustration and disappointment. But I soon realised that it is the outcome of a new government dispensation made up of many voices, and many dissenting at that, becoming more important. In principle, this is good for the nation, but unfortunate for us expecting the budget to be read on the day. It also does not necessarily send a good message to the markets, with the rand weakening by more than 1% within an hour of the announcement. There could also be knock-on effects that a later tabling will have on service delivery and operations of government. After some reflection, however, I have concluded that on balance, the decision to postpone is not as problematic as many have made it out to be over the past 24 hours. Clearly there are many balls to juggle by Minister Enoch Godongwana and many added complexities that have both national and international dimensions.

Lead-up to the budget

Internationally the strong nationalist policy drive by US President Donald Trump has already shown that the ‘make America great again’ mantra is alive and well as reflected in the intentional actions taken against South Africa since his second term started in January. We will see how this plays out over the coming months, but my view is that South Africa as a nation needs to be more deliberate in its policy agenda. We are at an inflection point where we must reflect on who we are as a nation and where we want to be down the line. We cannot afford to rely on handouts from other nations. There is more opportunity to this situation than threat, but we need intentional leadership to exploit it.

My big concern in the lead-up to the budget speech was that the minister would not take a firm stand on fighting the culture of non-compliance within state entities which has invariably led to unsustainable levels of irregular expenditure. For the 2023/24 financial year, the Auditor-General of South Africa reported that irregular expenditure totalled almost R50 billion, up from just over R27 billion the previous year. To put this into perspective, irregular expenditure equals approximately 2.2% of total government spending for the 2023/24 fiscal year. This might not seem significant stated as a percentage, but it has basically doubled since the previous year, and every preceding year before that too. Moreover, irregular expenditure equates to approximately 20% of the 2023/24 social grants budget and just about equals the 2024 National Student Financial Aid Scheme allocation. This is clearly a management failure and nothing seems to have been done about it over the years. As a result, the problem is escalating at an alarming rate. It is quite astounding that accountability management is not more explicit as it is clearly a very unpopular political message to send. But at what cost?

South African economy is not growing

To make matters worse, the South African economy is not growing both enough and fast enough. The most recent real GDP growth figure showed a decrease of 0.3% in the third quarter from the second quarter of 2024. Since 1994, the period with the highest annual rate of growth was a three-year period from 2005 to 2007 where growth exceeded 5% for each respective year. This period preceded the global financial crisis and since then, growth has struggled to reach 3% annually, doing so on only two occasions barring the 4.7% in 2021 which was not a true reflection of reality given the low base of the preceding year amid the COVID-19 pandemic. This is a major concern for the Minister, because with economic growth comes increased tax revenues, which in turn capacitates better budget management. Very simply, the more people spend; the more businesses sell; the larger the profit outcomes; the larger the tax revenue collections. If the economy grows, the fiscus collects more tax revenues without explicitly increasing tax rates. This built-in cyclical dynamic is simply not happening and creates a serious constraint on the ability of the Minister to manage deficits going forward.

Further to this of course is that as deficits are run, all things remaining constant, public debt increases. The public-debt-to-GDP ratio for 2023/24 already exceeds 72% which is higher than the generally accepted benchmark of 60% and almost 2.6 times what it was in 2008 (27.8%). This has resulted in the average interest on public debt approximating R1.1 billion a day, equating to about 22% of total tax revenues, or almost 20% of total government spending respectively. To put it differently, for every R1 government spends, 20 cents is first channelled to pay the interest on the debt before any spending occurs on roads, education, infrastructure, social grants and the like. These are deeply concerning figures in an economy with already high levels of unemployment and inequality.

Might be beginning of something better

There is a leadership void that cannot be ignored anymore. It needs to be intentional and deliberate. The GNU provides the platform to exploit ‘the best that South Africa has to offer’ as it promotes a broad-based and more inclusive political structure and played itself out yesterday. I welcome this in principle, but my concern is that political in-fighting will prevail and perverse politicking will trump working together in the best interests of the South African people. Although the postponement could be interpreted negatively in terms of the GNU not being able to find common ground, I think it is rather a sign of more rigorous engagement and the enablement of a collaborative environment amongst parties in the decision-making structures of the state. Remember this day as it might be the beginning of something better than what we are used to. 

News Archive

One of the UFS's newest members welcomed at international organisation.
2011-03-13

Photo: Gerda-Marié Viviers
Prof. Hussein Solomon

One of the University of the Free State’s (UFS) newest members of excellence was recently welcomed as a new member at the relatively new, yet influential, internationally renowned Our Humanity in the Balance (OHIB) organisation. Prof. Hussein Solomon, a month old Senior Professor in Political Science at the university, said he has always wanted to have made a difference in people's lives and dreamt of becoming part of an organisation such as the OHIB. Proofing of Solomon's dedication to his roots, he believes his focus must remain with the African continent. ''I would like OHIB to focus on making the secession process in Sudan as peaceful as possible as well as focusing on ending the ongoing conflicts in Somalia, the Ivory Coast and the Democratic Republic of the Congo. These are immediate goals. In the medium term we need to examine the issues of democratic transformation in countries like Swaziland and Zimbabwe.''

As this Kovsie has worked in peace NGOs, advised diplomats and acts as a serving officer in the South African Air Force and an academic, the compilation of the OHIB board consisting of academics, former senior diplomats and military people and peace activists would be nothing new to him. ''My role is essentially to bring these disparate communities together and to focus energies on a common project. At the moment much attention is being focused on current developments in Libya.''

Other accomplishments of this former Tuks lecturer include Visiting Professor at the Global Collaboration Centre at Osaka University in Japan, Visiting Fellow at the London School of Economics and also respective membership on the Security Council of the Gerhson Lehrman Group of Companies, the International Steering Committee of Global Action to Prevent War, and the International Advisory Council of the Toda Institute for Global Peace and Policy Research in Hawaii. Prof. Solomon was selected in 2008 to serve on the Nelson Mandela Chair of African Studies at Jawahrlal Nehru University in New Delhi, India.

His current area of research expertise include conflict and conflict resolution in Africa; South African Foreign Policy; international relations theory; religious fundamentalism and population movements within the developing world. His publications have appeared in several countries around the world including Switzerland, The Russian Federation and Japan.

We use cookies to make interactions with our websites and services easy and meaningful. To better understand how they are used, read more about the UFS cookie policy. By continuing to use this site you are giving us your consent to do this.

Accept