By Mbali Skosana

The North-West University (NWU) Business School hosted a Think Tank session in Vanderbijlpark recently, where a panel of experts delved into the contents of the medium-term budget speech by the Minister of Finance. All in attendance were welcomed by Professor Linda du Plessis, NWU deputy vice-chancellor for Planning and Campus Operations (Vanderbijlpark Campus). Professor Waldo Krugell from the NWU School of Economics chaired the discussion and was joined by professors Raymond Parsons from the NWU Business School and Gabila Nubong from the NWU School of Economics, all of whom provided valuable insights into the economic challenges facing South Africa.

Professor Krugell set the stage by highlighting the pressing issue confronting the National Treasury: the delicate balancing act between national debt and the gross domestic product (GDP) in the context of the country's struggling economy. This balancing act raised critical questions about its implications for both the general population and for companies.

In response, Professor Parsons stressed the importance of taking a comprehensive and long-term perspective when interpreting the medium-term budget. He noted that the budget did not contain any significant surprises, as many of the challenges and uncertainties had been discussed in prior analyses and had been recognised in the main budget released earlier in the year. Professor Parsons revisited the warnings in the Minister of Finance's February speech, particularly the section on "Risks to the economic outlook", which highlighted various domestic and global risks. Domestically, these included issues such as power cuts, deteriorating infrastructure, slow structural reforms, rampant criminal activity and fiscal risks.

Professor Parsons emphasised that the Minister of Finance was walking a tightrope with the medium-term budget, given the imminent election and the need to balance competing priorities within a severely constrained fiscal space. He described a significant portion of the speech as a preparatory exercise for reforms that would only materialise in and beyond February 2024. He also stressed that the burden of solving these economic challenges should not fall solely on the National Treasury, but should involve the cabinet, the private sector and collaborations between the government and the private sector.

A positive aspect of the minister's speech was his strict stance on state-owned enterprises, demanding stringent conditions be adhered to before funds would be allocated to them. The challenge now is to maintain this position. Although the medium-term budget provided a realistic assessment of the nation's economic situation, its credibility hinges on the successful implementation of the proposed remedies. Confidence in the future will depend on achieving higher inclusive growth rates.

Professor Gabila Nubong echoed many of Professor Parsons' views, characterising the medium-term budget as a pragmatic holding pattern, with the expectation of further decisions to be made in or beyond the 2024 main budget speech. The medium-term budget acknowledged the need for specific interventions to support growth, stabilise public finances and assist vulnerable groups. However, the credibility of these measures remains uncertain, as commitments in areas like electricity, infrastructure, state restructuring and corruption have been made in the past without tangible results.

Professor Nubong stressed the importance of moving beyond articulating issues and providing concrete action plans to address inefficiencies in the system. The medium-term budget's figures underscored the need for sound policy formation and a focus on key drivers of economic growth.

The issue of policy ownership, consistency and continuity was also highlighted, as promises have often gone unfulfilled over the years.

In discussing the tough decisions that need to be made, Professor Parsons noted that such decisions are rarely made this late in a political cycle. Professor Nubong suggested that, if tough decisions are necessary, they should prioritise job creation and assess public expenditure efficiency in specific sectors. He emphasised that without tangible results in employment creation, efforts would be in vain.

Prof Parsons’s take is that “South Africa's public finances remain on a slippery slope, and the risks to the fiscal outlook remain elevated. It is therefore necessary for such remedies and reforms as were promised in the medium-term budget to be tangibly implemented as soon as possible. With the overall debt-to-GDP ratio now projected to reach 77% in two years’ time, this will be the highest ever in South Africa’s fiscal history. What remains to be lacking in the 2023 Medium-Term Budget Policy Statement (MTBPS) is a clear fiscal plan to reduce deficits and government spending over time.”

Professor Waldo Krugell (left) from the NWU School of Economics chaired the discussion and was joined by professors Raymond Parsons (right) from the NWU Business School and Gabila Nubong (middle) from the NWU School of Economics.