South African economy needs necessitate a massive budget

As we consider the current state of the nation and the role of both government and business in transforming the country, these timeless words ring true. When those in power hesitate before making decisions, it means that they do so consistently and solely in the interest of the people. As a result, leaders who don’t tremble will falter because they won’t be making these decisions with care and thought.

“Xandla famba xandla vuya,” says a Shangan proverb, “means that the hand must stretch and give in order to receive.” State of the Nation Address (Sona) follow-up and expansion on the upcoming budget speech is eagerly anticipated. When this piece is published, the National Treasury will know exactly how much money it has available for 2022-2023. As a result, we contribute to the ongoing conversation about how the federal government comes to budgetary decisions.

An emerging economy like South Africa needs leaders who can lead by example, and the Shangan proverb provides just that.

Economic stagnation, joblessness, state collapse, public infrastructure failure, and the proliferation of illicit economic activity are all threats to the country’s “emergence,” according to the World Bank.

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South Africa’s emerging and submerging economies can be summarized by these five key areas. Employment and income inequality will worsen if economic growth and inclusion are not achieved. Illicit economic activity will flourish if public infrastructure is not carefully guarded and maintained, and if transformation is not implemented, the vast majority of South Africans will remain outside of the economic system, limiting future growth and revenue.

As a result, the collapse of the state would be the most important factor in the proliferation of the other factors. In an emerging economy, leadership effectiveness and behavior play a critical role in state capacity. The principles that should guide both the Sona and the budget are driving this emerging mindset.

Government debt, which is currently at 80.3% of GDP, and tax revenue generation are frequently brought up in public discourse. Economic growth and policy certainty are of greater concern to the private sector, whereas the government is still under pressure to control spending and limit its involvement in the economy

A budget that is bold and unapologetically acting like an emerging economy, rather than one that is submerging, is required because of the country’s stubbornly high unemployment rate of 34.9% and its youth unemployment rate of 66.5%, as well as its brazen inequality, which has been noted around the world as the most unequal society in the world.

Fiscal resources aren’t just about how they’re allocated; they also affect the structure of markets, institutions, and sectors, according to Finance Minister Enoch Godongwana at an event in September 2021.

In this way, the minister has been able to make important links between fiscal and industrial policy. Since the beginning of the new millennium, South Africa has allowed its economy to deindustrialize and become dominated by the tertiary sector. It is imperative that the budget allocate resources in a way that takes into account future socio-economic development.

Reindustrializing the economy and reinvigorating the TVET colleges are essential priorities in this year’s budget. Manufacturing currently accounts for 13% of GDP, with finance overtaking it as the largest industry with a 24% share. Learning and culture, health, and social development make up the bulk of the budget. Learning and culture received R402.9 billion in the previous budget.

The least amount of money was allocated to technical and vocational education and training (R13 billion). Aside from that, only 5% of people in the country have graduated from a TVET college. The economy’s technical requirements must take precedence over all other considerations if the country is to make further progress in development and reindustrialization.

The budget should reflect the country’s economic priorities, and in keeping with the Shangan proverb, the government must extend its hand in generosity in order to raise more tax revenue to support its various programs.

In many developed economies, the debt to GDP ratio is higher than in South Africa because governments have learned to take advantage of the monetary facilities available to them. In order to raise more tax revenue, we must learn to give more (spend wisely).