The 2022 Medium Term Budget Policy Statement

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Minister Godongwana’s second Medium Term Budget Policy Statement (MTBPS) signals the Treasury’s continued firm control of national and provincial spending. The debt-GDP ratio is set to peak this year or next, but the medium-term spending framework remains flat in real terms.

The MTBPS also signals the Minister’s intent to extend Treasury discipline to the wider public sector. State-owned companies will be assisted, but only once reforms and restructuring have been agreed upon. Local government continues to receive a rising share of nationally collected revenue, but efforts to strengthen capacity and boost municipal revenue have been prioritized. Subnational government and the financial position of several public entities and state enterprises are identified as major fiscal risks. The Treasury’s analysis of remuneration and employment has been broadened to include local government, public entities and state-owned companies.

Wider Treasury oversight of the public sector is long overdue – the fiscal consolidation effort will be self-defeating if expenditure discipline does not encompass the whole of government. But this involves more difficult institutional and analytical challenges than the planning mechanisms and expenditure controls that govern departmental budgets and spending. Reform of the Road Accident Fund will require shifts in the balance between social protection and private insurance. Efficient delivery of infrastructure services involves long-term planning and technology change, ownership and mandate reviews and difficult tariff and contract management reforms. Unless the structural weaknesses of the local government landscape are addressed, capacity building efforts will not yield greater accountability or local economic development. Vested interests will have to be confronted, whether in salary structures that are disproportionate relative to the public service or in contractual supply agreements that need to be renegotiated.

These cannot be addressed by the Treasury alone – we now need to see stronger engagement with the Presidency and other coordinating departments. And we need to know more about how the central advisory forums will play their roles –the National Planning Commission, the Presidential Economic Advisory Council, the Financial and Fiscal Commission, the National Energy Crisis Committee, the National Economic Development and Labour Council, amongst others.

If the Minister’s courageous fiscal framework is to contribute to faster growth and improved living standards, the fragmented policy advisory landscape has to be mobilized around a clear and agreed strategy for growth, employment, investment, housing and enterprise development.