SA cannot rely on long-term unexpected revenue, reforms must kick off soon: Godongwana

Finance Minister Enoch Godongwana presents the declaration on medium-term budgetary policy for 2022. Photo: Jaco Marais

  • Finance Minister Enoch Godongwana said South Africa needs structural reforms to start soon if it hopes to achieve growth.
  • He said the fiscus could not rely on unexpected gains better than expected for much longer.
  • Godongwana’s mid-term budget paid attention to Transnet as its operational challenges were becoming a financial crisis.
  • For more financial news, go to News24 Front page of business.

Finance Minister Enoch Godongwana said structural reforms must kick off as soon as the fiscus could not rely on better-than-expected unexpected revenues from developments such as the commodity cycle for much longer.

Godongwana was facing a virtual roundtable on his statement on medium-term budgetary policy (MTBPS) on Wednesday Thursday evening. The round table was organized by the Daily Maverick.

The medium-term budget used part of the higher-than-expected tax income to reduce public debt. The National Treasury predicts that by the end of 2023/24, the government’s revenue will exceed its spending apart from paying interest for the first time in 15 years.

The budget also included R5.8 billion to Transnet for infrastructure repair and maintenance of rail freight locomotives, support for Eskom’s R400 billion debt, R23.7 billion for Sanral and R3.4 billion for Denel.

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Journalist and webinar moderator Ray Mahlaka asked Godongwana if the Treasury was counting on the commodity cycle to continue contributing to high revenues. Godongwana said that in the current difficult global economic environment, nothing is guaranteed.

“It’s an interesting question because if you look at what we’re saying in MTBPS, the revenue has largely been large, meaning it’s not just mining. Let’s talk about the financial sector and manufacturing growth.

“We do not assume that revenue growth will be with us for long and that it will decline. If we are to make this assumption, we have to say how we position spending and spend revenue in such a way that we still maintain our fiscal prudence path,” Godongwana said. .

Godongwana said the performance of the manufacturing sector surprised many from a revenue perspective, but that the National Treasury was still operating on the assumption that this was temporary. He said that if there was a gloomy global economic outlook, it would affect South Africa.

“If Eskom, for example, were to improve the performance of the plant … that would change the game because then we will have, to some extent, a reliable supply of electricity,” Godongwana said.

Godongwana said 40% of South Africa’s economic underperformance could be attributed to the unreliable supply of electricity. He said Eskom and Transnet were receiving medium-term budgetary assistance because they were central parts of Operation Vulindlela – the joint delivery unit of the Presidency and the National Treasury – which seeks to lead structural economic reforms.

“I told the mixed committees today. They complained about those who can’t submit documents to Parliament. I told them they expect too much from the Treasury. They have many other entities and departments that report to them.

“For the most part, Transnet’s challenges have been operational. What caught our attention on Transnet was the financial issues, starting in June. We started digging into a number of issues. We said ok, operational issues. they are turning into a financial crisis, “he said.

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Economist Gina Schoeman said South Africa needs to provide support to Transnet so the economy can make the most of the commodity cycle and manufacturing recovery.

“We will exhibit where we have improved … [and where] progress has taken the economy and where not. This is what commodity cycles do to South Africa. As soon as they fall, we have a real idea of ​​what the economy really is like, ”Schoeman said.

Regarding concerns that Transnet was on the verge of becoming the next Eskom, Schoeman said: “Everyone calls Transnet the new Eskom. I say not so fast.”

“We saw Eskom’s true colors in 2008 and it took a long time to come up with plans to fix it. You can’t tell me there’s no time for us to put plans in place to repair Transnet if we act urgently,” he said. said Schoeman.

George Herman, chief investment officer and director of the Citadel, said: “I think the minister did the right thing by acknowledging that global positions are shrinking. We recently saw an example in the UK where their budget announced some features. not funded and the markets have rebelled against this. ”