“CR likes big numbers,” a National Treasury official noted with respect to President Cyril Ramaphosa.
In this matter, his State of the Nation speech on 6 February did not disappoint. It was peppered with statistics and one eye watering spending commitment. This was the promise for R940bn to be spent over next three years on infrastructure.
With our shuttered ports, decaying roads and energy and water crises, few would doubt this need.
However, the same National Treasury in a table attached to the 2024 medium term policy statement, painted a far grimmer and more realistic number: R 389bn is spent every year on ‘debt-service costs’ now the number one item of expenditure of the state, exceeding health, education, defence and social services. So, you have to wonder how the R940bn for infrastructure will be magicked up.
While SA awaits the unresolved cabinet disagreement over the delayed budget, this week another grim statistic was released. Last year total GDP grew by a measly 0.6%, far below the population increase, simply meaning each South African gets poorer every year.
The real issue behind the budget impasse is not in fact the headline row, i.e. how to fund the R58bn budget gap between spending commitments and revenue streams. Rather, and to avoid the recurrence of this political crisis, it is how to grow the economy.
We have run out of fiscal road and borrowing and taxing your way to prosperity has reached its limit.
The World Bank – a centre of caution in commenting on local politics, suggested that SA needs to relax both its labour laws and BEE requirements.
The Institute of Race Relations (IRR) is more forthright. Dr Gabriel Crouse of the IRR pointed out that the BEE procurement premium can add 25% to the cost of every tender for a road and a robot.
The logical approach is to cut the ideology and ramp up the common-sense approach to policy and spending. That seems, on past form, unlikely. However, if there is any advantage to the world of pain which a mercurial and powerful US President Donald Trump has unleashed on the world, including SA, it must be that the old ways no longer apply to the new epoch.
In Germany, the cherished ‘debt brake’ is being released as new Chancellor Friedrich Merz acts on the new reality that Germany must now pay for the defence umbrella previously offered by a now retreating US.
SA faces its own big losses -from aid to trade -from the Trump administration. Doubling down on old ideology and failed policy is no defence. If we don’t adapt and change, that R389bn spent each year on debt costs will multiply and then the budget larder will be truly emptied. And true impoverishment will result.
– Tony Leon
Executive Chairman of Resolve Communications
