Medium-Term Budget Policy

Nov 6, 2023

Navigating the Medium-Term Budget Policy

The Minister of Finance’s Medium-term Budget Policy Speech (MTBS) was delivered during a time of severe fiscal constraint. Despite some negative commentaries, there are in fact many positive initiatives. These range from short-term strategies to increase tax collections and reform the social wage system, to many initiatives focussing on immediate challenges, but which also have longer-term implications.

Budget Policy – Short-Term Strategies for Long-Term Gains

Addressing challenges such as logistics, infrastructure, crime, poverty, and inequality is crucial for extricating ourselves from the debt trap into which we have moved since 2008.
It’s essential that our strategies be rooted in empirical evidence and encompass an all-encompassing societal effort. Steering clear of overgeneralisations and supposed cure-alls, the focus should instead be directed towards precise actions within government spheres to instigate meaningful change.

Budget Policy

A Closer Look at the Fiscal Outlook – Budget Policy

The MTBS has been extensively discussed, with many commentators weighing in on the fiscal consolidation and economic growth. However, it’s essential to delve into the specifics that impact people’s daily lives – like infrastructure and procurement policies.

Strengthening Municipal Finances

The National Treasury’s introduction of a municipal debt relief programme is a commendable move. Drawing from the success of such an initiative previously introduced in eThekwini, where consumer debts were progressively written off as long as they remained current on their accounts, this approach promises to instil a culture of payment compliance, essential for sustainable financial management.

Investing in Water and Sanitation

The Minister has rightly emphasised the importance of water and waste water systems, though mentioning other fundamental services like roads and public transport would have provided a more holistic view. Prioritising these sectors is about more than convenience; it’s about laying the groundwork for economically and socially robust human settlements and meeting environmental challenges head-on.

Reversing Troubling Trends

A comparison between the fiscal years 2012/13 and 2022/23 reveals concerning patterns in municipal budgeting and spending:
• Budgeting and Spending: There’s an alarming increase in unspent municipal budgets, from R35 billion to R71.4 billion, signalling poor budgeting and management.
• Operational vs Capital Expenditure: There’s a decline in the proportion of capital expenditure, dropping from 19% to 12%, indicating less infrastructure development.
• Maintenance Expenditure: The low and declining investment in repairs and maintenance is leading to increased losses and outages.

Solutions for Better Financial Management

Addressing these fiscal challenges requires a detailed analysis of each municipality. Solutions range from strengthening administrative leadership, enhancing consequence management, to providing support to reverse negative financial trends. Despite significant investment in financial management, the number of financially distressed municipalities is on the rise.

The Role of the Infrastructure Finance and Implementation Support Agency

The creation of an infrastructure finance and implementation support agency is a welcome recommendation. However, caution is necessary to ensure decisions are made based on evidence rather than a blanket belief in private sector efficiency. Our experience in eThekwini during the FIFA World Cup demonstrated that in-house engineering professionals can provide more cost-effective services compared to external consultants.

Overregulation and the Need for Streamlined Procurement

Overregulation hampers development, and hopefully the upcoming Procurement Bill will simplify processes while tackling the real issues in supply chain management. Based on our experience, transparency and an independent appeals process are essential to curtail corruption. A more transparent and responsive government structure, coupled with strict consequence management, can reshape public perception and mitigate protests.
In sum, the Medium-Term Budget Policy Speech provides a foundation upon which we can build a stronger, more resilient economy. The focus should remain on evidence-based, specific actions that address both immediate needs and long-term development goals.

 

Households and Living Conditions

  • There are around 17.8 million households with an average size of 3.5 persons. However, there are notable provincial differences, such as Gauteng’s smaller average household size of 2.8 persons.
  • Gender dynamics vary too, with KwaZulu-Natal reporting 53% of households headed by women, contrasted by 46% in Gauteng.

Service Delivery and Infrastructure

  • Service delivery has improved remarkably across the board since 2011:
    • Access to piped water is now at 91.3%.
    • Flush toilets are available to 71% of households.
    • Electricity access has reached 94.7%.
    • The internet is accessible to 79% of households, a substantial increase from 35.2% in 2011.

Addressing Urbanisation and Service Disparities

South Africa’s urban landscape is highly differentiated, with the largest 20 municipalities now accounting for 53% of the population and 57% of the households. The census data reveal changes that are indicative of urban growth challenges but also show progress, such as the increase in formal housing and access to flush toilets across municipalities.

The Path Forward: Equitable Service Delivery and Infrastructure Investment

While the improvements in service delivery are praiseworthy, there is an urgent need to escalate infrastructure renewal and maintenance. Sustainable resource management and long-term planning are critical to meet the increasing demands for water and energy.

Call to Action for Municipalities and Government

  • Municipal infrastructure spending on repairs and maintenance needs a substantial increase from the current 3% of PPE expenditure.
  • Capital expenditure levels in municipalities are declining, a trend that requires immediate attention.
  • Enhancing technical and professional competencies in all spheres of government is non-negotiable to combat the negative perception affecting government employment choices.

Looking Ahead with Optimism

As we envision the next census a decade from now, it is imperative that we collaborate to maintain the momentum of development. The information provided by Census 2022 is a powerful tool for measuring policy performance and guiding the equitable distribution of resources. It is upon us all to use this evidence to guide our country towards greater heights of service delivery and prosperity.

By leveraging the comprehensive data from Census 2022, we can not only celebrate our achievements but also critically address the challenges ahead, ensuring that South Africa’s growth is inclusive and sustainable for all its people.