Budget deadlock points to government’s lack of a coherent plan

Nkosikhulule Nyembezi 

EVEN before the political bickering between lawmakers over political tradeoffs needed to pass the budget by today, we have been living under doubt and speculation since Moody's Investor Services, Fitch Ratings, and S&P Global Ratings downgraded the country’s sovereign credit rating one notch below investment grade. As the absence of consensus on the budget adds more pressure, we have all been getting antsy because of the enveloping crisis.

The term “crisis” derives from the Greek “krisis”, meaning decision or judgment. From this, we also get terms such as critic (someone who judges) and critical condition (a medical state that could go either way). 

A crisis can conclude fortunately or tragically, but the point is that its outcome is fundamentally uncertain. To experience a crisis is to inhabit a world that is temporarily up for grabs. It is the same with this budget-processing period meant to demonstrate collegiality between the freshly-mandated political parties in parliament. 

Since March 12, the finance minister has been talking about how much the delay in tabling and finalising the budget has stimulated an unprecedented level of public debate about the complex policy trade-offs the nation faces, which policies to fund, how to fund them, which priorities to pursue now and which ones to delay in the context of our limited resources. 

Yet, the unprecedented ongoing deadlock in passing the Budget is an indictment of the government’s lack of a coherent plan.

The extreme uncertainty indicates the severity of our current crisis concerning how or when it will end. It confirms that it is hard to imagine a set of policies that could successfully navigate such a lengthy hiatus, and it would be harder still to implement them under the current GNU configuration. 

People are looking for hope and reasons to plan a return to something economically viable and financially sustainable that includes gainful employment — anything — approximating normalcy. Experts are starting to speculate on what the first budget of this government of national unity will look like eventually. Yet there is so much we do not know about how well this budget will “grow the economy for the benefit of the majority”.

We do not know if the GNU will subsist in its current configuration or collapse and trigger early elections.

We do not know whether the crucial spending necessary to unlock investment opportunities will see the light of day as they depend on the contested multi-year VAT increase. 

We do not know whether the final budget will exclude the proposed above-inflation increases in the value of social grants premised on a VAT increase and additional teaching and healthcare positions.

We do not know if the lawmakers will collectively steer South Africa’s economic growth agenda and adopt a range of reforms to drive growth, create jobs and increase the revenue to spend on priority programmes.

We do not know whether the economy will bounce back in the form of a “v curve” … Or whether it will be a slow climb, as our economy has stagnated for over a decade, resulting in a projected average of 1.8% medium-term GDP growth. 

We do not know the full range of the consequences of a GDP growth that has averaged less than 2%, far below the level required to meet our expanding list of needs.

We do not know the full range of risk factors associated with whether the public wage settlement will be 4.5% or 5.5% agreed to later in wage negotiations and the potential disruption to the detriment of service delivery. 

We do not always know why the ANC and the DA have not resolved these sticking points: The scrapping of import tariffs on goods not manufactured in the country; publication within two weeks of requests for information (RFIs) for the concession of freight rail lines and the ports of Cape Town and Richards Bay; the scrapping of the ANC’s localisation policy; withdrawal of the draft regulations for the NHI Fund published in the Government Gazette this month; assurances there would be no VAT increase after 2026; cabinet agreement on amendments to the Expropriation Act by April 17; a spending review; and an audit of ghost workers in government, commencing on May 1.

A tree does not bloom in frost, and a frozen economy does not produce income. Justifiably, the immediate economic policy response most South Africans demand is: do something, do it big and do it fast. 

The immediate goal is to get the economy back to full steam with a minimal shortfall in productivity when the country’s sovereign credit rating improves and the turbulent geopolitical period loosens. The fear is that companies that cannot make economically viable and financially sustainable decisions that result in gainful employment will close their doors for good. 

Afterwards, it will take a long time for the right business to emerge, bringing together the right people to sell the right product in the right market. Some workers laid off since the coronavirus outbreak in 2020 have long had trouble finding the same job that suits them and pays well. 

This re-matching of markets, companies and workers often makes the political bickering between lawmakers over political tradeoffs unrelated to economic growth and budget processes nonsensical, prolonged and painful. It is better to stop businesses failing, job losses, economic stagnation, and unnecessary delays in passing the budget in the first place if the economic hardship is going to be short-lived.

We are working on a project about how the seventh administration might permanently alter people’s lives, even after the 2024 election campaign fever subsides. In what ways do you think your life will change in the long term? What will “grow the economy for the benefit of the majority”?

We do not know when any of this uncertainty will end for good. There is, at present, no convincing plan from the Union Buildings and Parliament on the way forward.

Nyembezi is a researcher, policy analyst and human rights activist 

Cape Times