Alec Hogg at MTBPS - Suspend your disbelief; ‘Rama-reforms’ are working

Key topics:

• Godongwana’s ‘Rama-reforms’ show progress in SA’s fiscal outlook

• VAT, import duties, and company taxes boost Treasury revenue unexpectedly

• NHI spending remains minimal, HIV/AIDS treatment prioritised in budget

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By Alec Hogg

Ever since Trevor Manuel handed over the reins a decade and a half ago, the twice-annual trek to Cape Town for a six hour lock-up focus on the state of the nation’s finances has been depression. 

Those in attendance have been subjected to poor policy, bad decisions and blatant spin doctoring from out-of-his-depth Nhlanhla Nene; opinionated and idealistic Pravin Gordhan, gullible Tito Mboweni and the utterly useless Malusi Gigaba. 

Notwithstanding continued excellent by professionals in the often under-siege Treasury, it’s hard for veterans of Parliament’s Budgeting events not to be cynical. 

The unlikely figure of Enoch Godongwana appears to possess the political heft and persuasion to achieve what his recent predecessors could not: a real and potentially sustainable turnaround in SA’s key financial metrics. 

Suspend your disbelief. The evidence shared in today’s MTBPS (a mid- update between National Budget addresses) paints a compelling picture of a GNU process that’s actually working. 

The nation’s CIC is sure to claim credit for his “Rama-Reforms”. His political opponents, naturally, will claim it’s all their work. The truth is probably somewhere in between. 

With its continued public blabbering about how it refuses to abandon destructive BEE policies and ruinous NHI, the ANC is still being dragged inch-by-inch into the real world. But where the key decisions are made, there is an appreciation that talk is cheap but money buys the whiskey.  

In truth, for thoughtful patriots, who deserves credit matters not. What does matter is that SA’s long slide that began in 2008 is now clearly over. For a nation so long starved of hope, that’s sufficient cause for celebration.

Over the weekend I read ‘Kasinomics’ pioneer GG Alcock’s latest treatise on SA’s booming informal sector. He makes a compelling argument that our economy is a lot stronger than depressing formal sector stats would have us believe. 

That GG’s view is catching on is vocally supported by Capitec’s outgoing CEO Gerrie Fourie. The updated national accounts released today in the MTBPS tells any rational observer that they must be right. 

Treasury is on track to receive a chunky R20bn more than what many economists fretted were stretched forecasts offered in the main Budget six months ago for the 2025/26 fiscal year to end February. 

Well over half of this unexpected cash injection comes from VAT. Yes, that very same area which Godongwana told us in March needed to be raised by at least a full percentage point. 

The table below drawn from end September’s SA Reserve Bank Bulletin, where this year’s take is in green, shows quite clearly how VAT and Import Duties have been overachieving.

Today’s MTBPS documents quantifies the VAT bonus at R11bn (up 7.8% yoy); with an  R4bn plus each flowing from one-off dividend taxes via mining and retails groups; and R4.6bn extra from the broader Companies Tax. 

Spending was hit by R754m needed to fill the gap left by the Trump-created USAID hole, but this, too, is instructive. An impression among many is that this dealt SA’s HIV/AIDS campaign a massive blow. Not so. 

While every little bit outsiders remove from SA taxpayer’s is welcome, in reality, USAID’s contribution is a relatively under 3% of the overall bill: This year the State will spend R26bn on treating those with HIV/Aids and other sexually diseases. 

Perhaps of more concern should be how these preventable diseases swallow more than a third of the country’s total Health Budget. For any rational mind, addressing this through massively accelerated communication of the dangers would seem to be an easy win. 

Mercifully, there was very little concrete evidence in the MTBPS to suggest the ANC’s unaffordable, financially ruinous NHI project has progressed beyond the rhetoric stage. NHI received just R32m extra (and that was for medicines) to take its total Budget allocation to R1.4bn - a rounding error in the overall picture.

Have a listen to the podcasts - and watch the BizNews Briefing this evening for the details.  

Read the full speech by clicking here.