Will there really be reforms post 2019 elections?

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FINANCE Minister Tito Mboweni, flanked by Deputy Finance Minister Mondli Gungubele and National Treasury director-general Dondo Mogajane, arrives in Parliament to present his Budget this week. Elmond Jiyane GCIS

In the lead up to the Budget Speech 2019, most analysts predicted that there would be no fundamental change given it being an election year. And so, it proved to be – no major amendments to tax rates, no changes to fiscal policy and spending remained balanced year on year. Right down the middle of the road then.

The speculation remains that Minister Mboweni is steadying the ship after Minister Nene’s resignation and that he has no intention of returning to the seat after the elections. Although he has denied this, the nature of his brutal honesty at times would lead us to believe that that may actually be the case.
Many keys to the future can be found not in terms of what is in the Budget but what is not there. 

When it came to the National Health Insurance (NHI), one line in the speech, in brackets was the entirety of the input to the NHI program. The bill has been back and forth between the Ministry of Health and the Presidency and this may be an indication that its implementation may be staggered given the fiscal constraints and the costs associated with NHI. It is also important to remember that the increase in VAT was considered to be the funding mechanism for NHI but that has been utilised for the phased in free education program.

Public sector wage bill and rationalisation of government. In this regard, the Budget did not announce any retrenchments for the public service, but other interventions such as early retirements and cut backs on performance bonuses and pay progression. Nothing was said about the rationalisation of the government. We do know from the State of the Nation Address 2018 that the President does hold a view on the size of Cabinet and by extension the number of Ministries. 

Seemingly we must wait for after elections for further news on this as it remains a guarded secret. Post the announcement on the wage bill there was the necessary outcry from organised labour. I do think that we are getting the consultation process with organised labour wrong. Almost daily we are seeing media reports of labour threats and this eroding the positive sentiment that was generated by the Jobs Summit in 2018. It is also not good for the outsiders and investors perception of economy. 

The Executive does hold a responsibility to consult organised labour and it is my view that in these trying times, NEDLAC should be meeting monthly to ensure that are raised and resolved. State Owned Enterprises (SOE’s). Although the Minister did spend a lot of the speech on SOE’s, much of its focus was on Eskom and the SABC. I think that we may be moving towards a level of private investment for Denel and South African Airways. 

Given that of the SOE’s these are the two with the least developmental agenda, this in all likelihood points to government takin a hybrid approach towards SOE’s. And what then do we make of the “Chief Reorganising Officer” (CRO). National Treasury will now attach a requirement for a CRO (likely of their choice) to be appointed if investment or a bailout is provided to a SOE. It will be interesting to know how this impacts on the ability of Boards of Directors to make appointments and who the CRO reports to. 

Clearly National Treasury is taking extraordinary steps to ensure that their investments are protected and that their contingent conditions are met. An interesting budget then and perhaps a sign of the times to come in terms of policy direction. We must look at the budget within the context of an election year. I think that post May, we may indeed see fundamental reforms and an altogether different spending pattern emerge.

Waseem Carrim is the CEO of the NYDA.