The Medium Term Budget Process

The Medium Term Budget Process

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The medium-term budget speech on Wednesday was the first by our new aspiring-to-be-president Finance Minister. I could not help but wonder if, between the position he has been given and the nuclear rush [so it seems], he has not been given a poison chalice by his incumbent president.

The Medium-term Budget Process…..

I remember the time when Trevor Manuel became the Finance Minister and we played rugby against the All Blacks. Like so many of our lovely people in Cape Town still today, he shouted for the HAKA Warriors. Suddenly, to all of our surprise, the Rand dropped. After all, how could Investors trust an unpatriotic Finance Minister with the nation’s Treasury? What a lesson for Trevor and an eye-opener for South Africa. Even given the wind that was at his back, he still became one of the most revered Finance Ministers we have ever had.

You see, it’s what a person in this position says AND DOES that makes the difference to those pesky investors and Rating Agencies. To quote Pravin Gordhan, he was presenting to Investors with US$5tn to invest when he was recalled by the president. You see, you can’t just sweet talk these guys and girls into giving you their monies, in fact, it’s mostly not theirs and they’re just asked to invest for pension funds, investment houses and the likes for a good and secure return. So they’re interested in the facts and not the fancies. Frankly, no matter how good your suit looks.

With that as background, Malusi Gigaba gave us and them nothing. On the positive side, he was brutally honest and told us that our debt is projected to rise to R3.04tn by 2021 and that would exceed 60% of our GDP. If we were building houses and hospitals we would still have a shot at understanding forgiveness but unfortunately, we’re not too sure whether we will rescue the SOE’s with it or pay commissions to India. By the way, KPMG could have learnt a thing or two from SAP on monies paid to or allowed to be paid to, the Indian connection. Informing the US authorities lifts the ante beyond the NPA and to where law enforcers actually enforce the law; so watch this space. He then proceeded to inform the watching world that he is going to sell Telkom shares in order to fund SAA’s 82nd [my exaggeration!] turnaround strategy. So what we intend to do is sell the non-essential [read: incorruptible] government investments to fund the ongoing rent-seeking from the SOE’s. Perhaps the thinking is, while the going is tough, the ruff keep going. With all this hard talk, no wonder he forgot to mention the nuclear deal. At least, Rostrom would be building the power station so it would not take as long as Medupe and Kusela but with a price tag of US$100bn and whatever in Rands by then, we could almost double our sovereign debt and still have some change from our childrens’ future GDP.

Of course, you would think I am only being sarcastic in writing like this but as we all know from a free Press, this is the thinking. And, it’s possible, though not probable, given a great Legal institution that protects the Constitution.

What we also know is that the budget presentation could have been put on Facebook to save money. The two paragraphs would have read something like this:

“Ladies and Gentlemen, we have a problem. Our growth is low and our debt is high. The situation is dire and we have two years to solve it before we need those equally-pesky IMF loans with conditions like, You Can’t Steal Anymore!

However, we have a plan, the first that we intend to implement effectively. We will:

  1. Monitor and fire people who spend taxpayers’ money on themselves or on wasteful, corrupt expenditure.
  2. Cut government expenditure by 10% in year 1 and 5% for 3 years thereafter.
  3. Appoint honest, capable directors and executives to the boards of the SOE’s so as to be able to consider privatising all SOE’s to knowledgeable shareholders with a proven track record in the respective industries.
  4. We will insist that business spend their R1tn cash reserves in South Africa because they, and their shareholders, trust us to deliver on our promises.
  5. We will have our last cabinet reshuffle for a while. As the Mother of All Reshuffles, we will fire ministers who are incompetent and risk the health and wealth of our People, including the indigent and retarded.

I have seen a few times in my life where people have done something in a department which they then re-inherited in a mess. But we have never seen the likes of Gigaba inheriting these rotten finances mainly from SOE’s where he appointed the directors whilst he was Minister of Public Works. Talk about sowing and reaping!

There is much to be worried about. The slide of the Rand is the first sign of that. We need to stay positive because we are positive by nature and believe.

Yours in Property.

Jack Trevena
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