The Four Takeaways From The National Budget

Last week the Finance Minister, Enoch Godongwana delivered the National Budget for the financial year beginning on 1 April 2023 and ending on 30 March 2024. Between now and then, there will be a debate on the budget and then various ministerial budgets, which must then be approved by Parliament.

For this note I have chosen just four items for discussion, Eskom, national debt, Transnet, and social support and health. I am choosing these four because I want to save everyone reading time, not because other issues are not important. Examples include health, policing and jobs, among others.

In the coming months I will discuss these at length.

Eskom

Eskom is now the number one topic in South Africa because of loadshedding, which is causing a lot of damage and affecting the rights of people. Eskom is 100% owned by the South African state, which means all of us. It is insolvent and drowning in debt even though electricity is the lifeblood of any modern society. It is in our interest that we keep electricity flowing.

In my previous article I stated that Eskom has debts of about R422bn, faces a net loss of more than R20bn for 2022 and is owed R57bn by municipalities who are themselves in financial trouble. To try and manage this situation, the government has decided to take on about R253bn of Eskom’s debt, which includes both interest payments and the funds initially borrowed. This will reduce Eskom’s debt burden and hopefully free up some cash to be used for maintenance.

Even so, solving loadshedding will not take less than a year, assuming everything goes perfectly. Part of what needs to be done is to resolve the case involving political parties, Eskom and Nersa over the latest tariff increase. Since Eskom is financially unviable, it still needs money from tariff increases. Cabinet have not allocated any money to make up for the tariff increase, if Nersa’s decision is set aside. That will mean that any progress on loadshedding will have to wait until new funds have been found.

The minister also spoke about municipalities that owe Eskom about R57bn. If Cabinet is serious about making them pay, then they must ensure that Eskom does not have to approach the courts to force them to pay, but I am not hopeful. The worst culprits are municipalities in the Free State and Mpumalanga, although other areas such as Soweto also have a legacy debt problem.

As you can see, resolving loadshedding needs a lot of money, and for very difficult political decisions to be taken. Those decisions are unlikely to come from a parliament that is as chaotic as we have seen recently, where MPs seem uninterested in anything other than appearing on TV shouting slogans.

National Debt

Like all governments, the South African government borrows to fund its budget. This money is borrowed mainly from banks, pension, and investment funds. While a lot of African countries borrow in dollars, South Africa is fortunate to have very strong local investment vehicles, so most of our national debt is dollar denominated.

In 2022 the government had income of just over R1.8trillion, mostly made up of taxes. The budget amounts to R2.3trillion. The government will have to borrow R284billion to fund this year’s budget programs. As we borrow, we must also pay interest on existing debt of R4trillion, which will amount to about R340billion. This is now the biggest single item of spending in our Budget.

I am highlighting this issue because to succeed, our country must spend more on improving people’s lives than on servicing debt. In our current case and due to mismanagement of the economy and government, we are now spending more on servicing debt than we do on such important issues as health, for example. Spending on health in this financial year will be R259billion, almost R100bn less than we spend on paying interest on debt.

One of the reasons we must encourage everyone we know to RISE is to make sure that our national finances are managed well so that we do not end up spending so much more on debt than we do on improving the lives of suffering and hardworking South Africans.

Transnet

Transnet did not receive any new allocations in this budget even though there is a clear need for us to invest in rail and ports. One of the reasons RISE Mzansi will have a coordinated approach to policymaking is illustrated by the Transnet problem.

Because of under-investment over the years, and because of the corruption involving locomotives from China, for which people like Brian Molefe and Anoj Singh have been arrested and charged, Transnet does not have enough trains. Its railway lines are also in bad shape and affected by cable theft among other problems.

This has pushed companies to use trucks to transport goods, which are more expensive. The cost of trucking goods around the country is passed on to consumers like you and I, which means prices increase more than they would have we had a functioning railway system. In turn, the increase in prices eventually causes cost of living to worsen.

Having so many trucks is also bad for our roads that were never designed to handle so much heavy traffic. This means we have two problems getting worse at the same time – railways that are falling apart and have no budget allocations; and roads that are getting worse and affecting service delivery because we have no railways.

This is another reason we must RISE. What I have just described above is economic mismanagement that in turn hits ordinary people in their pockets.

Social Services & Public Health

Whenever there is mention of social services or social development, most people think of social grants. When we speak of health, people think of clinics and hospitals, and medication. These are all important, but I decided to look for an example of integrated policymaking.

Most of us are aware of how bad drug abuse has become among young people. They are often called “nyaope boys” or “amaphara”, but these are real human beings, people’s beloved children who have fallen off the tracks for many different reasons. A caring society puts measures in place to support people and families that are affected so that the rest of society is not harmed.

In the Health, Police and Social Development budgets there is no mention of drug abuse as a growing problem that needs an integrated solution. Instead, these affected people are likely to get worse, get arrested or killed either by the drugs or during the commission of a crime.

Integrated policymaking and budgeting is one of the things we RISE for, to respond adequately to emerging problems before they become a crisis.

Conclusion

This year’s Budget has been published under conditions of crisis, with loadshedding and violent crime threatening to overwhelm society. The question we must consider is what a crisis budget should look like? Are there issues the government should cut back spending on so that it can focus on priorities such as loadshedding?

My view is that sooner rather than later, circumstances will force us into that situation – and that will be a very difficult time for millions of people.