MTBPS23 – How Enoch intends (slowly) getting SA out of self-inflicted mess 

By Alec Hogg*

Perhaps the most telling number in finance minister Enoch Godongwana’s entire presentation comes in his foreword to its 73-page outline. After adjusting for inflation, public spending every year for each South African has grown from R27 629 in 2008 to R33 390 this year. 

To appreciate the relevance, first consider SA’s population is growing at 1.6% a year. So instead of enjoying economies of scale, each new baby added to the SA mix costs incrementally more for those who have to pay for the exercise. And lest we forget, every cent of government spending is funded by taxation – ie from the labours of the productive sector of the economy. 

This illustrates how much the nation is overspending. Just like any spendthrift in any walk of life, it’s a high road to disaster. Especially, as Godongwana explained, if the additional spending has been wasted. Not that he said it as bluntly, but “this large spending increase has had little impact on economic growth,” means pretty much the same thing. 

He explains, presumably to the ANC’s largely uninformed rural constituency: frequent power cuts make it hard to do business and deteriorating rail freight and slow port operations mean fewer goods transported to markets. This has made SA more vulnerable to external shocks like China’s slowdown, higher interest rates and ructions from geopolitics. 

Deeper into the documents comes an admission that will shock the economic ignoramuses who gather in a vibrant profligacy lobby: “Evidence from 2008 to 2019 (pre-Covid) shows that higher public spending and persistent Budget deficits failed to bolster economic growth in SA.” Mainly because is increases debt, SOE bailouts and “funding of ineffective programmes.”

So what does the nation’s financial director intend doing about this downward spiral?

First and foremost, he has prioritized growing the stagnant economy. Doing so requires fixing electricity and logistics where State monopolies have wrought the economic disaster. That takes time. And as Treasury’s own forecasts tell us (see below), the economy will continue to grow more slowly than population for at least two more years. 

Godongwana writes about capital investment being too low; too many government activities being “inefficient, overlapping and non-critical’; and, sharily for a politician, an economy that does not generate enough revenue to service government debt over the long-term.

Given the state of the place and disastrous impact of public sector monopolies Eskom and Transnet, more hopeful among us may have dreamt of mass privatization. Introducing private sector energy and urgency has the potential to rapidly lift the Good Ship SA onto a different trajectory.

Sadly, this is the ANC. When it comes to private capital, Pretoria is always a reluctant partner. It only released the electricity monopoly two years ago – and then after a titanic internal struggle despite electricity being blacked out for 10 hours in every 24. 

Political dogma is embedded deeply into the movement. No matter how clear the evidence, its socialist roots together with its tripartite alliance’s Communist and Cosatu bedfellows means the P word can never to be uttered. So, instead, Godongwana talks once more about “improving the provision of electricity and logistics” to boost economic growth. 

As we have learnt from bitter experience in SA, having a Blue Light Brigader say something and actually see them achieve it are very different things. On the upside, SA’s Treasury is staffed by smart, engaged, bright mostly idealistic young things who see the train smash coming and know how to avoid it. With different bosses they will surely get their wings. 

Roll on 2024. 

*Alec Hogg is the editor of BizNews

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