Kathy Gibson reports – The 2021 Budget, tabled on Wednesday (24 February 2021) sent a clarion call for all South Africans – individuals, business and government – to pull together in ensuring the country can recover from the ravages of the past years.
During 2020, government had to make tough choices to ride the wave of the pandemic and, despite the adverse circumstances, Finance Minister Tito Mboweni tabled a mild and marker-friendly budget.
That’s the word from Deon Shango, CEO of PwC Africa, who calls for government and business to take action, and to work together to help South Africa grow its way out of a potential fiscal crisis.
“We have the capacity and the resources,” he says. “We cannot allow uncertainty to lead us to a state of paralysis.
“As business we have a role to play,” Shango adds. “We have to identify opportunities including upskilling, training. Business also need to look at how they can structure and enhance operational efficiencies. It’s up to all of us to make what differences we can.”
This view is echoed by political analyst Justus Malala. “I think we are seeing the minister and government saying the right things. The package the minister put before us was a powerful pitch to what we can achieve, and big beginning for fiscal prudence.”
However, Malala cautions that the success of the budget relies on two assumptions.
“The first big ‘if’ is will the public sector unions play ball with government in terms of freezing wages. This is a political issue and if it can’t be pulled off, we could see the whole thread unravelling.
“The second big ‘if’ is the addiction to funding state-owned enterprises (SOEs).”
He points out that R7-billion has been allocated to the Landbank, and SAA will be looking for additional funds soon.
“It is a good budget overall, and largely a politically sound budget. But these are the two big issues we need to look out for.”
Martin Kingston, chair of Business for South Africa (B4SA), says the budget was responsive and responsible, although its success relies on a number of issues.
The first is business confidence. “If you don’t have private sector-led growth we wont be able to ensure the revenue increases as much as possible. And this is a factor of confidence.
“The private sector only source of investment and jobs.”
The vaccine rollout is a vital issue. “We are clear that in the absence of urgent and efficient vaccine rollout we will have to deal with e epidemic in future, with more lockdowns and all the consequences.”
Structural reform needs to happen, Kingston adds. “Structural reform has been spoken about, but the proof of the pudding is in the eating. We are working with government on the economic recovery plan, but it all comes down to implementation.”
Fiscal prudence is necessary going forward, he adds. “We need to live within our means, reducing or maintaining our cost base. Central to that is public sector wage reform and productivity. We are not getting vale for money from the public sector and we need to grasp the nettle.”
Kingston believes we need to be cautious about the issue of servicing debt. “We could be getting into a very significant debt trap, and we need to be able to tighten our belts accordingly.”
He says the finance minister encapsulated the challenges and the opportunities in the budget. “We need to see if we have the political will to carry through.
“And we need to harness all the resources available to work collectivity to achieve those objectives.”
Babalwa Ngonyama, CEO of Sinayo Securities, says the minister listened to business, labour and civil society in a very consultative budget.
“This budget talks a lot about partnering and consulting, and we all need to pull through,” she says.
“We are quite clear the we need to spend to get out of the problems; but it must be a recovery that is well thought through and focused on spending responsibly.”
Ngonyama points out that the treasury has not taken the easier road on this budget. “They have realised that it is important to support the economy and increase the tax base, and this is what they have done.
“Now we have to build skills from an education point of view to ensure we bring people who are outside the net into the net.
“Overall, minister has put in front of us a very strong, brave budget and adamant in saying this is where we want to be, now it is up to us to get there.”
Lullu Krugel, chief economist of PwC, says the budget ticked most of the boxes in an economist’s wish list. ‘It was very transparent, and what we were looking for.”
She agrees that implementation is key. “This is where we have fallen short in the past. Historically we have not covered ourselves in glory, but put plans on the table that we haven’t implemented.”
On the plus side, the minister of finance and treasury understand the realities of the situation, Krugel says. “There is a clear understand that we cannot continue on the current SOE path, that came through in the documents – that is very clear from the documentation.
“What is also clear is that we are probably through the worst of Covid, but are still climbing a steep hill, and it will take two to three years to get back to where we were in 2019.”
Mboweni sent a clear message about partnering with business, Krugel adds. “This is a budget where we all need to jump in and do what we need to do.”
The news of tax is positive, says Kyle Mandy, tax policy leader at PwC, “I think it is as conservative a budget as we could have expected, and tax policy is heading in the right direction.
“Collections have been resilient, and it’s positive that government has stuck to its policy of cutting back on expenditure, which means it intends to stick to its fiscal consolidation.”
Mandy believes we will see a slow reform from relying on direct taxes to indirect taxes, which is growth-friendly and positive from a tax point of view.