Balancing The Books In An Imbalanced State
The Board of the African Women Chartered Accountants (AWCA) has noted the Medium-term Budget Statement delivered by the Finance Minister this week. As reflective of the trying times we find ourselves in politically, this was the statement that was delivered by a third different Minister in the last 3 years. As citizens and professionals, we have to express a concern regarding the frequency of changes in such a crucial ministry. Nevertheless, we do commend Minister Malusi Gigaba for his efforts in stabilizing the state of the country’s finances since his appointment.
The last 3 medium term budget statements have naturally reflected a state of public finances that is in steady decline. In Minister Nhlanhla Nene’s 2015 budget, growth forecasts were revised from 2% to 1.5% expected to rise to 1.7% in 2016, all in the shadow of a 3.8% budget deficit. Minister Pravin Gordhan’s 2016 statement – delivered in the shadow of a revised 3.4% deficit – shifted Nene’s growth forecast further, reducing it to just 0.5% with an expected rise to 1.3% in 2017. Minister Gigaba’s projections are more depressing – growth is now expected to be 0.7%, paired with a deficit of 4.3%.
The disclosure that the expected tax gap will be R50.8 billion for the current term and that gross national debt is expected to rise to 61% in 2022 is an indication that our economic outcomes are not going to improve organically. Rather, a fundamental shift in policy formulation, execution and monitoring is necessary in order for the economic turnaround to be realized.
Minister Gigaba did not shy away from the fact that we are heading for a challenging couple of years. The reality is that the economic fundamentals remain incapable of stimulating the inclusive growth that is urgently needed. Far too many exhibits of weaknesses within the economic and social consensus exist. These all need to be individually and collectively addressed if we are to see a change in the country’s fortunes. An economy dominated by features of market concentration, low participation of women in the economic value chain, and a skills mismatch in the public sector will not be able to cater to the needs of South Africans at large.
State owned enterprises remain the state’s most direct instrument of intervention in the economic value chain. However, the poor governance within such institutions has resulted in them moving away from being pillars of economic transformation to being the drivers of economic decline. This is an unsustainable situation. As AWCA, we therefore believe that fundamental reforms in the governance of these enterprises – particularly those who find themselves confronted by allegations of corruption – need to be initiated as a matter of urgency.
South Africa’s path to recovery needs to be built on a blueprint of honest engagement between all stakeholders. Such a blueprint needs to be able to align the needs of the country, the capacity of the state and the contribution of the private sector towards a common goal. None of the stakeholders can afford to sit out this conversation. As committed citizens and professionals, we do welcome the acknowledgement by the state that immediate and urgent action is warranted. In line with our strategy to influence policy formulation, the AWCA remains committed to participate, engage and guide the tough conversations that need to be undertaken to deal with the current economic crisis.