South Africa finds itself in a real financial crisis and although the medium-term budget policy statement offers an important opportunity to reprioritise so as to address current problems, it will do nothing to solve the real problem of policy uncertainty, which is the ANC government's doing.
Some of the problems that must be urgently addressed include the severe drought and worsening water scarcity in the country – money is needed for building infrastructure like dams and reservoirs. Money is also needed to support farmers in disaster drought areas.
Public Enterprises are putting an immense and unnecessary burden on the fiscus. These enterprises are presently just black holes swallowing tax money without showing any signs of improvement or benefit.
The turn-around strategy for Eskom that Minister Pravin Gordhan announced today will not have an immediate effect on the current crisis. The outstanding debt to Eskom will not be paid overnight because the municipalities are bankrupt.
There is no other solution but to privatise and deregulate Eskom to ensure that market forces can work together to bring about healthy competition and ultimately, sustainable power supply.
Both the Ministers of Public Enterprises and Finance are held hostage by their party’s ideology, alliance partners and trade unions that simply refuse to go along with unpopular decisions that have to be taken to bring about restoration.
These decisions include, among other things, reducing the government's wage bill, retrenching redundant staff members, a moratorium on salary increases as well as privatisation and deregulation.
The power that the trade unions exert over the government and the effect of that on the economy means that the entire South Africa is being held hostage. A drastic change in direction is needed to escape this dead end and the budget policy statement is the chance to bring about that change in direction.
It is clear that the Minister has very little leeway to balance the budget. It is also becoming increasingly clear that there will be a substantial deficit in tax revenue.
Large businesses simply do not have enough confidence to invest in South Africa and, thus, broaden the tax base. This lack of confidence can only be rectified through policy certainty, but the ANC is clearly not capable of establishing that.
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