Budget 2022 is more of a "holding operation"

by Raymond Parsons: Professor at the NWU School of Business & Governance and a former special policy adviser to Busa.
In challenging economic circumstances Finance Minister Enoch Godongwana displayed a safe pair of hands in navigating SA’s public finances towards debt stability and fiscal sustainability in the immediate future. The Budget Speech reflected a realistic assessment of SA’s current economic situation, identified the risks that still needed to be managed, and highlighted the importance of anchoring appropriate fiscal strategies for now. The Budget Speech had several confidence-building features.

On the back of a strong revenue performance and lower expenditure since the Medium Term Budget Policy Statement, in November, debt metrics have improved. The Budget Speech also recognised the extent to which SA’s economic fortunes were linked to economic diversification and higher inclusive growth in future. It was also possible for the Budget to make appropriate tax decisions given the present weak state of the economy. The broad message of the Budget is positive for business and consumers.

Nonetheless, it is not clear that the 2022 Budget yet represents a step change in the growth prospects for SA. The Budget Speech offered a modest average growth projection of 1.8% over the next three years. It appears that several of the key tough policy decisions – which are badly needed for much higher job-rich growth than 1.8% – were either postponed or subjected to further delayed processes. In some ways the Budget Speech seemed rather like a ‘holding operation’, when a little more urgency should have been injected into the decision-making.

If the economy is eventually to reach the 4% - 5% growth level needed to significantly reduce unemployment, more attention must be given now to unlocking the economy’s true growth and employment potential. As Finance Minister Godongwana also warned; fiscal plans and expectations cannot rest on tax revenue overruns, but must be founded on sustainable long term growth strategies. There are still vulnerabilities and future uncertainties to be addressed. Issues such as the challenge of the public sector wage bill, the need to more definitively resolve the Eskom problem, and the urgency of structural reform remain ‘unfinished business’ on the national agenda.

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