26/10/2017 05:50 SAST | Updated 26/10/2017 05:50 SAST

Malusi Gigaba’s Budget Statement Of Stagnation

Young minister gets that sinking feeling as numbers come in.

Finance Minister Malusi Gigaba.
Rogan Ward / Reuters
Finance Minister Malusi Gigaba.

In the good-time budgets, former finance minister Trevor Manuel used to hand out fruit as a symbol of harvest and, on one occasion, a tree as a symbol of planting for tomorrow's generation.

Finance Minister Malusi Gigaba presented only his first budget policy statement on Wednesday, but if it were a fruit, it would be a raisin -- wrinkled and wrung out.

The budget statement is sad: it comes bearing bad news of rock-bottom tax collection, sky-high government debt, low growth disabled by politics, a yawning deficit of 4.1% and plummeting revenues.

Moreover, South Africa has breached its self-imposed expenditure ceiling by R3.9-billion, which is mainly the cost of bailing out both South African Airways and the Post Office. By keeping to its own expenditure ceiling, South Africa has been regarded as an outlier in public-finance management. That reputation is now ruined, unless Gigaba can make good on his promise of bringing in a private-sector equity partner to the national airline, which will allow us to fall back under the expenditure ceiling.

Last year, President Jacob Zuma said that even a partial sell-off of SAA was not a possibility, so this is unlikely to happen while he is still in office.

Even the jolly minister could not muster too many smiles as he addressed the media ahead of his statement on Wednesday. SA Reserve Bank governor Lesetja Kganyago sat on the podium looking grim, often with his hand on his chin.

A stony-faced SARS Commissioner Tom Moyane also sat alongside Gigaba -- revenues have hit levels so low, they have not been seen since the democratic government established the new revenue authority.

While SARS has in the past always been able to collect taxes at percentages higher than national growth, that pattern has been broken.

In the parlance of the day, SARS is regarded as being "captured" -- its leadership pruned back by Moyane.

Many commentators believe this is because the former officials of SARS undertook investigations into too many crony networks, including the Guptas, as well as Zuma's brother and son's tobacco interests. The outcome of the capture is institutional weakness at the revenue authority.

Gigaba knows he cannot announce big tax increases, as compliance is falling as quickly as revenues, so there is no news of any hikes in Wednesday's budget statement. "I may feel we need more taxes, but where will they come from?" he asked.

His question bears out the lean times the country is in. "South Africa's stated policy aspirations and its social needs far exceed available public resources. Moreover, there is little space for tax increases in the current environment. Any new policy proposals, or expansion of existing programmes, should address only the most effective and necessary interventions," says the budget statement.

The minister may not want to spook South Africans with talk of tax hikes, but they are coming.

To constrain government debt under 60% of gross domestic product will cost an estimated R40-billion next year – that can only be raised by spending cuts or tax hikes. Government intends growing spending at an average of 7.3% a year over the next three years, so tax hikes are almost a certainty.

These are times of stagnation, and the budget statement says as much.

"The National Treasury's macroeconomic projections imply that per-capita income will continue to stagnate in the years ahead. Unless decisive action is taken to chart a new course, the country could remain caught in the cycle of weak growth, mounting government debt, shrinking budgets and rising unemployment," Gigaba's maiden statement warns.

What is being done about it? "A stronger package of measures to stimulate economic growth is being developed," says the statement. The meat on the bones of that package will only be revealed in next February's budget, by which time there will be a new ANC president and new de facto leader of South Africa, so Gigaba's statement should be regarded as a holding pattern.

Gigaba did not have good news to present on Wednesday, so he used the poet Ben Okri to help him persuade the nation to get its shoulder to the wheel.

"Will you be at the harvest,

Among the gatherers of new fruits?"

Then you must begin today to remake

Your mental and spiritual world,

And join the warriors and celebrants of freedom,

Realisers of great dreams.

You can't remake the world without remaking yourself," he started his first big policy speech.

There was a time when South Africa's budgets and its budget statements were about harvesting the fruits of good governance.

Now, the country's economy is returned to the poetry of hope in a time of stagnation.