Prof. Bonke Dumisa
Next Wednesday will be mini budget day,. This is when the Minister of Finance, Enoch Godongwana, will be tabling his Medium Term Budget Policy Statement for the year.
As the name suggests, this is an annual event that takes place halfway between this year’s February Budget Speech and next year’s Budget in February.
All departments and other state structures are always expected to state and justify their budgets for the current year, and state whether their current expenditure patterns are in line with what was budgeted for (past expenditure) and show how their future expenditures for this year will be according to what was budgeted for (financial year budgets). They will then make projections for the next two years to show a big picture of their revenues and expenditure patterns over a three-year period.
Based on these figures, the departments will then state whether they require any additional budget allocations and why. In certain cases, they may also ask for roll-overs where they can justify this without forfeiting their previous allocations to the national government as unspent allocations.
The attractiveness of this MTBPS process is its simplicity; anyone can easily use it. They use the incremental approach, where they simply increase every budget item by a particular percentage to arrive at the budget for the following year. This makes departmental budgeting very predictable.
The major disadvantage of this approach is that departments hardly revisit and re-prioritise their budget items. This brings in the challenge about the relevance of some of these budget items.
One former Minister of Finance, Tito Mboweni, tried to recommend that the government introduces the zero-based budgeting system to ensure that everything budgeted for is relevant and important. That did not make him many friends in the public service bureaucracy.
It is partly on these grounds that I feel that people cannot expect anything new from Godongwana’s MTBPS on November 1. To make things even more difficult for those who want to hear some pleasant surprises from the MTBPS is the letter that the National Treasury sent to all government structures.
The letter mentions all the necessary cost-cutting measures that must be adopted to avoid any further financial challenges for the government. This will make it difficult for many departments to justify any new budget expenditures, unless there are any very exceptional circumstances.
I was asked by different platforms to predict what will come out of the MTBPS. I gave them this whole background and said: “Don’t expect much on November 1”. Some of them thought I was just reluctant to do the economic analysis.
Under the serious financial circumstances that the South African economy is subjected to, it is very difficult to see how the government can find any additional finance to address the issue of SMME funding or to see how they can allocate more money to address unacceptably high youth unemployment.
Addressing one of the government imbizos recently, President Cyril Ramaphosa did indicate that they will need to dedicate more financial resources towards fixing the never-ending Eskom load shedding problems.
Ramaphosa also mentioned that the ever-increasing social welfare grant system is costing a lot of money, with over 27 million people on various forms of social grants.
What the President did not say here is that South Africa now has less than eight million taxpayers who actually pay personal income taxes and that this taxpayer base is actually dwindling as more taxpayers emigrate.
In short, the many constituencies who expect more money will not see such money being allocated to them; firstly, because the National Treasury cannot come up with new policy issues at the medium-term budget level. Policy issues are best dealt with at the February national Budget stage.
Second, there is hardly any possibility for such additional funds because of the “austerity” environment the country is facing.
However, let’s remember that there will be national and provincial elections next year. This is when politicians in a governing political party are capable of acting recklessly and spend the money they don’t have in order to say they are delivering on their political promises of a better life for all.
It is precisely on these grounds we have already heard a number of Cabinet ministers and other politicians saying they reject the “austerity” measures sent out by the National Treasury.
It is also against this background that Minister of Social Development Lindiwe Zulu, is now saying, “the Basic Income Grant is on the cards”, knowing very well that this will not be the case because this will be unsustainable.
The same can be said about the unsustainable National Health Insurance, which others are trying to push through despite the lack of budget for it. Don’t bet on Godongwana trying to do some political posturing and pandering on such financially unjustifiable vote-buying reckless budget allocations on Wednesday.
*Prof. Dumisa is an independent economic analyst
**The views expressed do not necessarily reflect the views of Independent Media or IOL