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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

Two research chairs awarded to UFS women
2015-09-15


Prof Pumla Gobodo-Madikizela

Two professors at the University of the Free State (UFS) have just been chosen as recipients of research chairs by the National Research Foundation’s South African Research Chair Initiative.

The research chairs are a massive financial injection for research in each of the relevant disciplines – that of Profs Pumla Gobodo-Madikizela from the Centre for Trauma, Forgiveness, and Reconciliation Studies at the UFS, and Felicity Burt from the Department of Medical Microbiology in the Faculty of Health Sciences.

Profs Gobodo-Madikizela and Burt are two of 42 female researchers in the country receiving research chairs as an initiative to give due recognition to women in research.

Profs Hendrik Swart, from our Departement of Physics and Melany Walker, Director, Centre for Research on Higher Education and Development, each also holds research chairs by the NRF. A third research chair has also been granted to the UFS Department of Plant Sciences for the research in field crops.


Prof Felicity Burt

The work of Prof Burt’s research chair is to investigate medically significant vector-borne and zoonotic viruses currently circulating; to define associations between these viruses and specific disease manifestations that have previously not been described in our region, to increase awareness of these pathogens; to further our understanding of host immune responses, which should facilitate development of novel treatments or vaccines and drug discovery.

Prof Gobodo-Madikizela, who has received international recognition for her work on forgiveness studies, will use this research chair to investigate historical trauma within two African contexts – those of South Africa and Rwanda. She hopes to gain insight into the role that memory plays in the formation of the experience of trauma, and to bring about healing of the trauma.

Prof Corli Witthuhn, Vice-Rector: Research at the UFS, expressed her pride on the announcement.

“We are extremely proud of the national recognition these two outstanding women researchers received.  The UFS strives for research excellence, and the five current NRF research chairs, as well as two NRF A-graded researchers who are at the forefront of their disciplines globally, indicates our continued commitment to innovating, relevant, and high-impact research.  We are excited about the progress of the past two years to position the UFS as a national leader in research.”

 

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