Business

The peril of national purse: Why no-one wants Minister Tito Mboweni's job

The peril of national purse: Why no-one wants Minister Tito Mboweni's job

JOHANNESBURG – Finance Minister Tito Mboweni will deliver his second Budget today before Parliament and the nation. He has one of the most unenviable tasks of delivering the national Budget as the country battles with a highly indebted, jobless and stagnant economy.

The lacklustre performance of key sectors like manufacturing, agriculture, mining and retail simply accentuate the crisis in our economy.

The undershooting of revenue targets and ever-increasing spending pressures will further limit the fiscal space.

The looming downgrade by Moody’s, the only rating agency that still rates South African debt above investment grade, simply compounds the scale of the crisis.

The unravelling of our state-owned enterprises (SOE) will further limit the number of levers that are available to the minister.

Mboweni will therefore be pardoned for appearing to be playing to the gallery, which consists of the business community, analysts, investors, finders and rating agencies.

The dysfunctional municipalities have all but become the weakest link in our co-operative governance and spatial framework and as such add another layer of uncertainty and risk.

All these factors simply constitute the depth and scale that Mboweni has to frame his Budget.

What are the options open to the minister?

Mboweni will have to reintroduce the expenditure ceiling, peg the Budget deficit at 6 percent over the medium term and maintain the total debt at no more 70 percent of gross domestic product (GDP).

Any deviation, however marginal, will be seen by the gallery as credit negative.

He will have to bring to effect inclusive growth by a combination of tax expenditures, incentives and concessions. He has to demonstrate a shift from consumption expenditure towards investment and hope to significantly shift the dial of investment as a percentage of GDP.

Anything significantly higher than paltry capital formation as a percentage of GDP will do very little to placate the gallery, unless the projections show significantly higher rate of growth than the paltry 8 percent and at least 20 percent as a percentage of GDP.

The reimagining of SOEs, the renewed focus of infrastructure and the operationalisation of wealth funds will be some of those measures that Mboweni will be expected to take.

The minister will also hope that his gallery audience is also familiar with the strategy paper “Economic transformation, inclusive growth and competitiveness: Towards an economic strategy for South Africa”, which includes focusing on network industries agriculture and tourism.

One issue that the gallery and the benches appear to agree on, and at times for entirely different reasons, is the issue of structural reform. The phrase structural reform has become somewhat hackneyed and more often obfuscates what is really meant.

However, Mboweni will need to be clear and can simply not afford to be ambivalent. The oligopolistic structure of the major sectors of the South African industry which provides barriers to entry will have to be broken.

The elimination of onerous conditions to improve the ease of doing business as well as unnecessary travel and visa restrictions will have to be expedited. The restoration of the country's electricity supply and an increase in rainfall will most likely ease concerns about power and food security.

Mboweni will have to address the contentious and new issues. Key among these are the government wage bill, the Gauteng toll road, land reform and the SOEs – in particular SAA and Eskom.

He will need to offer a cogent business case for the new envisaged State Bank and the Sovereign Wealth Fund. He will also need to apprise the nation about the Land Bank and the National Empowerment Fund, which for some reason did not feature much in President Cyril Ramaphosa’s State of the Nation address.

Mboweni is acutely aware that when it comes to managing the national purse it is not what is said that attracts attention, but it is what is not said that becomes even more crucial.

As a consummate economist he knows too well that he will need to make defining trade-offs and far reaching decisions to stabilise the country's finances.

Mboweni, who has recently developed a penchant for biblical injunctions, will probably need more than that to marshal the confidence and trust of both the floor and galley audience.

One thing is certain though, and that is that after his speech he will have fewer friends and no-one queueing to take his job, providing cold comfort to Mboweni.

Landiwe J Mahlangu is the chief economist at Amazwe Analytics and Advisory.

BUSINESS REPORT