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Unprecedented budget speech, but remember this day

20 February 2025 Photo Supplied

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

Qwaqwa Campus opens: Prof. PA Mbati's speech

2005-01-22

Official welcome speech by Prof. PA Mbati for 2005 first year students held on Saturday 22nd January 2005. Program Director, The Chief Director Operations Rev. Kiepi Jaftha, Dean of Students Dr. Natie Luyt, Program Head of the Faculty of Humanities, Dr. Elias Malete, Program Head of Faculty of Natural and Agricultural Sciences, Prof. Riaan Luyt, Acting Program Head of the Faculty of Economics and Management Sciences Prof. Andries Venter, Deputy Director Student Affairs Mr. Teboho Manchu, Coordinator Finance: Mrs. Elizabeth Nchapi, Senior Librarian Mr. Stoffel Kok, Senior Magistrate Mr Saul Mohosho, SRC President Mr. Tello Motloung, members of staff, invited guests, parents, guardians, my dear students, ladies and gentlemen.

It is indeed my pleasure to welcome you to the official welcoming ceremony of the UFS-Qwaqwa Campus 2005 first year students. Our Rector and Vice Chancellor Professor Frederick has requested me to pass to you his warmest wishes and regards on this special occasion. I am confident that the orientation exercise in which you have participated has achieved the desired effect of introducing you to your new way of life here on campus, and that you are now sufficiently prepared to get on with the rigors of being a student at this University.

Following the restructuring of the higher education landscape, the Qwaqwa campus was incorporated into the University of the Free State with effect from January 1 2003 . As a consequence, Management was faced with a whole complex series of challenges including, primarily making the campus financially viable, but also ensuring that it remains relevant in it’s core business as a satellite campus of the University of the Free State in terms of its teaching, learning, research and community service responsibilities.

A whole series of strategic planning workshops were conducted last year with both internal and external stakeholders. Various important strategic objectives were flagged out, and the next level of consultation will take place soon. I know that there is a lot of eagerness, sometimes to the level of impatience to see this process completed as quickly as possible. But again on the other hand, due to the far reaching consequences of any hasty decisions, plus the need for a carefully planned process, we need to be a little more patient before the implementation of the strategic objectives is implemented. You will be kept informed as this important and critical aspect in the evolution of our campus takes place.

As a response to the need for a more effective governance model on the Qwaqwa campus, a review of the governance structure was completed towards the end of 2004 and will soon serve before the Executive of the Executive Management for approval.

Due to the importance that top management attaches to the development of an effective governance on the Qwaqwa campus, the process was facilitated by an internationally acclaimed consultant. Again the contents of the revised governance model will be made known to the campus and the broader community once it is approved.

I am glad to report that in recognition of the need to improve the infrastructure on campus to provide a conducive learning atmosphere to our students, a total of 8.2 million rands was made available towards the end of 2004 for recapitalization of specifically our student residences and lecture venues. The first phase of the residence renovation is completed and residences C, D and E have now been officially handed over to the University by the Contractor. Among the features of the renovated residences is that they will now computer rooms, kitchenettes for cooking, and a redesigned TV room. The rooms have even been fitted with heaters. Our challenge will now be to maintain our newly acquired facilities and to ensure that they do not again deteriorate to an un-acceptable level. The second phase of renovation will start soon.

As indicated in my address during the orientation week, our obligation to you as a campus is to offer you quality training to the best of our ability, and to disseminate this knowledge to you within a conducive atmosphere worthy of good learning. On the other hand, our students have to take advantage of this opportunity to acquire the necessary skills and training in the various academic programs that we offer on campus.

We have a very simple agenda on this campus – our vision is to continuously strive to build and develop the Qwaqwa campus of University of the Free State into a truly quality institution of higher learning in our country. To develop a tradition and culture in which we are proud of who we are, and constantly and tirelessly working towards excellence in our academic programs, and other non-academic but core and important aspects in your growth and development such as sport and community service. To nurture young conscientious citizens who are aware of their duties and responsibilities. Ultimately to produce hard working young people who fully exploit their potentials, and who will serve this country with diligence when unleashed into the real world in effectively managing their roles and responsibilities in society, whether in private or government civil service.

I would like to encourage that the various stake holders of this campus, the students, academic, administrative and support staff, and our broader community, to work together in harmony for the well being of our campus. For this campus to continue to be relevant in the environment that we find ourselves, there is a need for continuous engagement of its various stake holders, and genuinely listening to each other. We must continuously and regularly keep our feelers on alert in order that we can remain relevant.

I am particularly inviting our parents and guardians, the alumni of this campus, and leaders from our community to join hands with us in seeking solutions to the various challenges that we continue to face on campus. I am open for frank and honest discourse on the best way forward for our campus.

The University of the Free State is committed in making tertiary education accessible to as many students as possible. In this regard, students who do not have the required ‘M’ score to gain entry into main stream classes are given an opportunity to study in the highly successful ‘bridging program’ in which learners are integrated with main stream students but with fewer courses to tackle in order to ensure success. This is done on the premise that such students have the potential to pursue a degree course, and that therefore within a well structured program, they can make a success of their lives.

The University is conscious of the fact that in many instances several academically deserving students fail to be admitted into university due to financial reasons. For students who are academically deserving but who because of reasons of poverty cannot pay the requisite fees, the university is able to assist such students through the National Financial Aid Scheme – commonly known as NSFAS, and University Merit Awards. Other incentives such as Sports bursaries are also available.

Please remember that it is important to balance your life on campus and the phrase ‘a healthy mind in a healthy body’ aptly describes this statement. Ensure that you participate in sport and cultural activities of this campus so that you can develop and strengthen the various God-given talents that you have been blessed with.

A second major ingredient for your success on campus is discipline and respect for rules, policies and procedures that govern the University of the Free State , and respect for your fellow students. Good discipline is a major contributory factor to success in life, and more so in your formative academic life at University. This means for example that you must attend all your lectures, complete your assignments on-time and visit the library frequently. Please manage your time wisely and responsibly. Remember that as a university student, you are basically the master and architect of your own destiny.

Think very carefully when you are confronted with difficult situations, be they negative peer pressure, or temptations to indulge in intoxicating drugs, and make the right choice.

The University has well trained personnel including a social worker, a psychologist and counselor, and members of the student affairs division under the leadership of Mr. Teboho Manchu, Deputy Director Student Affairs, who are available to assist whenever you require their help.

Today is also a special day because we have officially inaugurated the SRC President and the rest of the SRC leadership. I am sure that you all join me in congratulating the SRC for being elected to their leadership roles for 2005. Mr. SRC president and your team, please remember that you now have a huge responsibility in carrying out the aspirations of the student body on campus. I want to wish you luck and success as you champion the rights of your constituents, which I believe and trust will be compatible with management’s expectations with regard to quality teaching and learning on campus. As you are aware, Management values the input that the student leadership makes in the operational management of the affairs of this campus, and we look forward to a cordial, non-confrontational working relationship with a view of rendering un-paralleled service on campus.

Mr. Program Director, allow me to wish everyone here a successful and prosperous year. May the good Lord give us the strength and courage to overcome any obstacle that may be placed in our way in the course of our work in 2005.

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