EDITORIAL | Enoch sets a course for the broad, sunlit uplands

Finance minister Enoch Godongwana’s medium-term budget policy statement draws a solid line under a dismal era in which the country languished in the economic badlands.

For the better part of a decade, we were hobbled by a junk credit rating imposed in 2017 that spoke to a glaring lack of credibility as successive finance ministers pleaded for a tightening of the purse strings. Their pleas fell on deaf ears, with the national debt soaring and growth and employment remaining in the doldrums. Taxpayer rands increasingly funded a profligate government that prioritised spending on wages and bailouts for failing state-owned entities over investment for the future.

Experts are in little doubt that South Africa’s management of the economy is turning a corner, with the S&P Global ratings upgrade this week seen as a reward for the renewed emphasis on fiscal discipline

Experts are in little doubt that South Africa’s management of the economy is turning a corner, with the S&P Global ratings upgrade this week seen as a reward for the renewed emphasis on fiscal discipline. The prospect of an interest-rate cut is on the table when the Reserve Bank monetary policy committee meets in the days ahead, and more rate cuts are in the pipeline as the Treasury’s new 3% inflation target instils the discipline so clearly lacking in previous years.

The numbers presented by Godongwana are impressive, with the debt-to-GDP ratio stabilising at 77.9%, and set to fall to 77% in financial 2029, which reflects fiscal consolidation and debt stabilisation. This is good news, notwithstanding that debt still consumes 21c of every rand collected in revenue. But even then, revenue is expected to be R19.7bn higher than projected, reflecting better VAT collections and corporate tax.

As gratifying as the cold numbers may be to the experts, it is the tone Godongwana struck that will resonate with the public. Who would have imagined that an ANC finance minister would stand up for the middle class, which is precisely what Godongwana did in his rejection of health minister Aaron Motsoaledi’s proposal to remove medical aid tax credits to fund the mooted National Health Insurance scheme?

This is a radical departure from the old ANC narrative of “tax the rich” and suggests a refreshing focus on the interests of the middle class and its importance to the economy.

What brought about this sea change in the government’s approach? Part of the answer is the formation of the government of national unity, and the spectacular bust-up earlier this year when Godongwana tried to foist an unpopular VAT increase on the country. That failed as the realities of the ANC’s 40% electoral showing hit home. In the negotiations that followed, the GNU parties also agreed to a spending review that has cut waste by about R7bn.

Beyond the budgeting process, President Cyril Ramaphosa’s Vulindlela programme breathed new life into state utilities such as Eskom and Transnet, which ended load-shedding and ensured our exports began to reach our ports.

Godongwana’s budget has given South Africa a new lease on life, and it is vital that he stays the course. The disastrous turn to populism that saw Jacob Zuma elected president of the ANC in 2007, and the ejection of Thabo Mbeki after a period of sustained growth, dare not be repeated. Radical ideas that have no place in modern economic theory or a changing world economy must be resisted if we are to continue on a path that, while demanding sacrifices, is our surest route to modest prosperity for all.