A week ago, Finance Minister Enoch Godongwana tabled a budget that should, in theory, set out a roadmap for medium-term fiscal management. It should have clarified the soft and hard trade-offs inherent in managing public funds.
But what happened the day before meant that the 2024 Budget was reduced to the passive statement of intent that always precedes election season. The Bureau of Statistics has released the latest unemployment data for the country.
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The data shows that unemployment rates remain persistent and biased against black citizens.
Although the official unemployment rate has exceeded the 32% level, the expanded unemployment rate remains near the 41% level. The only good thing about this data is that the number of employed citizens (16.7 million) has finally exceeded the pre-coronavirus level of 16.4 million. For the remaining indicators, the situation remains dire and severely crossed.
The unemployment rate for young people aged 15 to 34 exceeds 44%, and the fate of young people aged 15 to 24 is even more dire, with 59% still unemployed.
A more worrying situation has emerged in connection with the transition of young people from the realm of basic education and social assistance to the world of post-secondary education and work. Of the country's 10.2 million people between the ages of 15 and 24, approximately 3.4 million are not employed, have no education or training for the world of work, and live in the socio-economic vacuum. I'm here.
The transition to higher education will significantly change their prospects, but even those who had the opportunity to transition to higher education and eventually graduate face a growing crisis as graduate unemployment rates continue to rise. It is a matter of concern.
9.6% of graduates are currently unemployed, up from 8.5% a year ago.
Collectively, these data points paint a picture of an economic system that is completely unfit for purpose and completely incapable of addressing the paralysis of the national economy if left unchecked.
Shortly after the release of the unemployment data, President Cyril Ramaphosa announced that the next general election would be held on May 29, 2024.
Read: ANC pledges to transform financial sector in election manifesto
Thus began the countdown to a hotly contested election. There, unemployment and burden reduction are expected to play an important role as a means of mobilizing the opposition and as a point of repentance for the ANC, which is looking to give itself another chance.
result
The effects of the unemployment crisis became clear the next day. godongwana Presented the budget.
As the economy continues to stagnate, there is no sign of growth in tax revenues accompanying economic growth. The positive effects of windfall taxes generated by the post-COVID-19 product boom were nowhere to be seen.
With no increase in the revenue base and an increase in expenditure that still needs to be funded, the options left for the finance minister to raise the funds to make ends meet are to borrow through the crisis or to seek even more from the public. It was up to them to collect it. Both options will cause problems for a long time.
Current debt already consumes a large portion of the budget, and borrowing any more would only make the situation worse and would be a reversal of the minister's commitment to balance the books.
Taxing people in an election year is notoriously unpopular and would be a sacrilege by the minister given the closeness of the general election.
Any action that further worsens the public's position will only increase the risk of political fallout that undermines the current administration's campaign.
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While the issues inherent in this dilemma have long been considered and presided over by the entire ANC government, the responsibility for spending cuts that alienate civil servants and those dependent on the social wage falls squarely on the shoulders of the nation's people. It will be. Not the one who caused the problem due to incompetence, but the one who declares it.
“Magic trick”
To deal with this dilemma, ministers used their last remaining weapon to protect public finances, simply refusing to borrow more and not committing to new relief for the demanding state-owned enterprise portfolio.
Read: Government works to reduce exposure to state-owned enterprise debt
His enterprising solution was to first tap into the lucrative but undesirable safety deposit box of gold and foreign exchange reserves. The size of foreign exchange reserves has ballooned only because of the currency's poor performance against the US dollar, in which the reserves are denominated.
The second option was to simply ghost the request for assistance, reminding Transnet of the ghost train story. The appeal of this approach is easy to see.
Ministers can argue that by releasing R150 billion rather than borrowing from foreign exchange reserves, they have avoided worsening an already fragile situation because they are technically not borrowing any more.
Ministers avoided making necessarily costly commitments by acting as if they could afford to postpone Transnet albatross into the future.
By ignoring the question of how to fund the National Health Service, even after the President suggested he was seconds away from legislation, ministers are denying the real impact of the NHS's most ambitious public reform initiative. It succeeded in keeping the public anxious about financial exposure for an extended period of time. present day.
Read: Repeal the NHI bill, it’s unconstitutional – from Busa to Ramaphosa
The problem of a combination of solutions may be enough to carry the country and the party past election day, but it does nothing to address the underlying problem that created the need for such a magic trick in the first place. That's true.
Politicians such as ministers are allowed to use election dates as a basis for decision-making, but citizens have no such freedom and are free to make these trade-offs regardless of which government is in power. The results will leave you scratching your head.
This is not simply a celebration of the budget hype whose sole feature was its failure to alienate key constituencies due to the election period, but rather a long-term view of the negative budget presented to the people. This means that the impact should already be discussed. us last week.
