Some thoughts before budget day
European debt woes risk evolving into a full-blown financial and economic crisis. When the United States sneezed in 2008, we were not fully inoculated and lost over a million jobs..
Europe is coughing but so far they have contained their sneezing. If they do start sneezing, will we catch a light cold or full blown flu that will knock us out and find us with having to face a hard road to recovery? We cannot afford a lengthy period in hospital, where we use our resources on recovery and not growth.
It is against this international backdrop - we are intimately linked to the world economy - that Finance Minister Pravin Gordhan takes to the podium on Wednesday to deliver his budget speech. He is the man with the purse who will tell us what choices our government has made this year.
In President Zuma's SONA, he placed infrastructure development at the centre of his vision for this country's economic development. He moved his government into the how of job creation.
Minister Gordhan will have to tell us how we can afford this ambitious drive. . Will he increase taxes on an already financially-frazzled public to fund this massive exercise that could potentially inoculate us when Europe sneezes? Or will he spare us and find other ways to unlock resources within the country?
With the public reeling from the fast-growing costs of food prices eroding their limited budgets, any further pressure will not be welcome. But at the same time, we cannot neglect administering inoculations that will protect us from catching a cold or worst still a dangerous flu. This could not only put pressure on us but threaten to decimate us.
Will he choose to invest heavily in the cost of the inoculation? It will always be a challenge balancing needs with wants, sequencing whether to build a school or a road and then to decide what the trade off's should be. Similarly, do we use our resources to create jobs or do we pay public servants more? Can we afford as a country to go further into debt? Should we outstrip the country's available resources, financial and otherwise or opt for prudent fiscal management? It is unlikely given the ambitious plan that the president has outlined, that prudent fiscal management will be the guiding imperative.
What is clear from President Zuma's address that he and his government have decided to take the risks necessary to create economic opportunies on a large scale. This will mean that Minister Gordhan will have to open his purse.
There is not likely to be hesitation on his side because he is one of the ministers centrally involved in putting together this ambitious plan. He will no doubt however be absorbed with the task of getting greater value for every rand spent.
He will have to explain how we will strengthen our financial institutions sufficiently to reverse the disastrous overspending in all provinces last year. Will he be able to assure an increasingly nervous public that his interventions will work?
Alongside this challenge, he will have to report back on the government’s progress on fighting the scourge of corruption. Reports of the ghastly levels of corruption in both the public and private sectors - it takes two to tango - have sent shivers down our spines. Civil society's launch of a corruption watch is a major glimmer of hope in this dark murky world of underhanded wheelings and dealings. We must find the strength and the courage to call a halt to this practice that threatens the foundations of our young democracy
When President Zuma shared his economic vision at the opening of parliament, he confidently brought together different elements of work of some of his key ministries - especially those dealing with various parts of the South African economy.
He stitched key elements of the New Growth Path into the National Planning Commission's Vision 2030. The contents of these two policy statements are well focused: we need more jobs, we require better educational outcomes, we need a different discourse around spatial planning, an effective public service and we need to ease the high disease burden.
To make this happen, Minister Gordhan is likely to reconfirm the government's commitment to a labour absorbing growth trajectory into which the ambitious infrastructure plan fits into neatly.
Infrastructure spend is nothing new. We did this in the years preceding the World Cup and today some of us are fortunate to pass through our very modern airports that we successfully built. This is besides the Gautrain and the stadiums which some of us enjoy. What is however very new is the scale of this present enterprise and the attention to detail previously not properly attended to. We lost a major opportunity during the World Cup to enlarge our manufacturing capability when we procured World Cup paraphernalia from China. There was no prior stipulation of a local procurement commitment.
Since then, government, business and labour have been involved in lengthy discussions chaired by Minister Patel which ended in the signing of a Local Procurement Accord at the end of last year. There is now a strong commitment across the board for every effort to be made to plan for manufacturing and buying locally. For example, efforts will be made to build component parts of the planned railway infrastructure locally. This includes building of railway carriages. Can we do this locally? What parts will we have to import and what can we make here?
While the earlier infrastructure spend was focused on the needs of staging the World Cup soccer tournament. the present infrastructure plan has the potential of changing the pace of the South African economic engine. It is majorly tied to the huge international demand for our iron ore, manganese and coal. Through rail development, an enlarged mining belt will be created linking KZN, the Free State and the Eastern Cape.
As we know our country is high on the list of countries with enormous untapped mineral resources.
Over more than two centuries, our mining industry has grown formidably with little care given to the well-being of communities within which it was located. There is a huge awareness amongst South Africans that they have paid an enormous price for the development of this industry without seeing its benefits. To the contrary. They continue to sit with its consequences. Development of mining in South Africa was based on forcing South African men to leave the families to enter the money economy. It is a story that has been well documented. It is virtually solely responsible for breaking up intricate family and community networks within far-flung and surrounding local communities. Today we continue to deal with the cost of these traumatic incursions into a thriving way of life.
Minister Gordhan hopefully will not ignore this issue of huge public interest across the country. He needs to show how monies spent on infrastructure development will take into account the importance of empowering local communities along the mining belt.
We have at least one community model that is taking the lead in this regard. The Royal Bafokeng (150,000 strong) in the North West Province is at the cutting edge of a growing movement of self-empowerment - doing it for ourselves. Located on huge platinum-rich land, they have recently announced their plans to be a self-sustaining community by the year 2020. They are fortunate that they not only own the land but have a leader that enjoys widespread legitimacy. It will be interesting to see if Minister Gordhan acknowledges the huge public interest and sends out the right signals to show that he takes this seriously.
We have to begin to turn around a legacy of economic exploitation which saw millions of South Africans carrying the costs but not enjoying the benefits of a developed mining industry.
As Minister Gordhan speaks on Wednessday, the European Union headquartered in Brussels is tightening its centralised management of the potential crisis. Minister Gordhan can take solace from the fact that we will have more than the infrastructure programme as a buffer if the sneezing is not controlled. Fortunately, if the global risk becomes big, teh price of gold will shoot up and this will provide some insulation.
At the same time, Africa is projected to grow over the next few years and this too provides us with a buffer.
In the end however the economic plan that is now unfolding will be a boost to our system that is likely to see us progress as a nation and achieve the goals set in the NPC's Vision 2030. Much will depend on our single-minded determination to put the well-being of our communities first and unfold this plan so that all South Africans can benefit and not just a few who are committed only to their own inoculation.