South African Minister Of Finance Enoch Godongwana Delivers 2023 Budget Speech – In his first budget on Wednesday, Finance Minister Enoch Godongwana had the politically unpopular task of showing how rising debt servicing costs could overwhelm social spending. We know it will, because the president said so.
“The [Finance Minister] will give a full picture of what servicing our debt will do to our budget and what we need to do. It will do so so that we can all get a better price,” President Cyril Ramaphosa said in his reply to a parliamentary debate on the State of the Nation (Sona) address on 16 February.
South African Minister Of Finance Enoch Godongwana Delivers 2023 Budget Speech
“As public spending has grown so rapidly, the benefits of spending growth have eroded and the cost of servicing our debt has reached the point where social spending is squeezed,” Ramaphosa told MPs.
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It was an echo of his February 10th speech, in which he warned even as he described his administration’s achievements: “We must recognize that we are facing extreme fiscal constraints. The financial crisis will further harm the poor through the deterioration of the basic services they depend on.
When Wednesday’s budget arrives, Finance Minister Enoch Godongwana will take some time to pick up where the president left off: to talk about South Africa’s debt, which is expected to weaken growth in a rising deficit and underperforming economy. This is circular.
The finance minister, who has strengthened over the years as the economic policy chair of the African National Assembly, is under pressure to increase social spending. The drive, both ideological and fueled by growing hunger, poverty and inequality, comes as the 699th day of the COVID-19 lockdown comes.
As early as February 1, when Godongwana briefed lawmakers on the $750 million World Bank loan, he let slip that the debt would be dealt with in his first budget.
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“Right now, what we’re going to tell you on February 23rd is that if we don’t change the direction of the debt, we may not be able to meet our commitments…
“We must change this debt. “The [World Bank] loan itself is not a threat to that obligation,” the finance minister said.
This is a continuation of the approach taken when presenting the first Medium Term Budget Policy Statement (MTBPS) in November 2021.
“The $4.4 trillion we pay now covers debt service costs, which will become the largest share of spending by any single factor starting next year. These debt service charges are not discretionary; in other words, we cannot avoid paying them. So it has the effect of crowding out other spending priorities,” Godongwana said at the time.
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They don’t mince words here, although they emphasize that two-thirds of public spending goes to social wages and social security, including free wages, free health care, free housing and subsidies.
In doing so, Godongwana first signaled the continuation of Tito Mibowen, who at one point openly described the discrepancy between South Africa’s income and expenditure as a “behemoth gap”.
Analogies aside, this continuity is politically important given the ideological tussle with the ruling ANC and its allies. If finance ministers are reading from the same page as the president, a breakthrough will be difficult, regardless of ideological differences.
Already in his 2019 budget speech, Moboweni bluntly said, “We will borrow about R1.2 billion a day, assuming we don’t borrow at the end of the week.”
South Africa’s Finance Minister Enoch Godongwana Speaks With South Africa’s President Cyril Ramaphosa Ahead Of Presenting His 2022 Budget Speech In Cape Town, South Africa, February 23, 2022. Reuters/shelley Christians Stock Photo
His October 2020 MTBPS speech is no small feat. “If the deterioration of the fiscal position is not addressed, it will lead to sovereign debt defaults and a reversal of many gains from the democratic era,” he said.
For the 2021 budget, Mboweni announced R264.9 billion in spending cuts over the next three years, as debt repayment remains the government’s fastest-growing expenditure item.
At the time, South Africa’s debt service charge was 21 cents per tax. Before the wasteful and fruitless spending of these departments and agencies, before corrupt practices such as bidding for dubious Covid-19 personal protective equipment, and usually overpaying for goods purchased by the state.
Given Godongwana’s own suggestions, but also Ramaphosa’s recent statements about Sona, the majority of the 2022 budget will deal with debt control, and South Africa will be cutting the coattails to wear it.
Minister Of Finance (south Africa)
Economists expect tighter debt management and macroeconomic stability. Cosatu Labor Union wants to create jobs in key labor institutions such as Conciliation, Conciliation and Arbitration Commissions and make cuts more social costs. The DA will play a bigger role for the private sector and fight corruption together to reduce the national debt.
The expanded definition includes unemployment at 46.4%, which includes those who are too desperate to find work. In light of this, Godongwana took a breather: Statistics South Africa has announced that the October to December 2021 quarterly labor force survey has been delayed “due to quality checks that need to be carried out prior to the release of the results”.
Inflation was 5.9%, although food inflation was relatively high, but soaring gasoline prices added to pressure on already struggling consumers. Economic growth has stagnated, recently revised down to 4.8% from 5.2% in 2021, and 1.7% in 2022.
But the South African Revenue Service expects additional tax revenue of up to R200 billion from the mining boom. The tax storm will benefit Godongwana in Wednesday’s budget. It will fund a reasonable increase in social assistance (pension, child care, maintenance and disability benefits) instead of the R10 to R30 extra allowance received last year.
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It also provides the R50-billion needed to extend Ramaphosa’s R350-a-month hardship allowance for one year, as announced by Sona.
It remains to be seen whether he can increase the amount demanded by civil society and others, as he awaits any further steps towards more meaningful social support, including a basic income grant.
Given the budget’s record of adding more than 800,000 jobs over the next 16 months, the president is expected to find money for the president’s jobs drive, which will run from the project office.
Confirmed in the 2022 budget are changes to the Employment Tax Incentive or Youth Wage Subsidy, which is actually a tax credit for companies that hire young people. Again, we know this because Ramaphosa announced it on Sona, putting it to Godongwana to “announce the details of these changes in Khamchot”.
Watch: Finance Minister Delivers 2022 Budget Speech
Left by the government and the political boss to talk about the national debt, now using the finance minister’s political grandson, who has developed into the economic policy chief of the National Political Council, this president ticks the box of appeals: “Let us be optimistic businessmen. “…reliable.”
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