Budget done, it’s now onto the emergency Covid-19 Budget

Much of the processes leading up to Friday’s vote, and the votes themselves, this year were a statutory formality. It’s no secret new budgetary allocations have to deal with the havoc wreaked by South Africa’s Covid-19 hard lockdown.

South Africa’s economy is now expected to contract anywhere between 5.8% according to the IMF or 6.1% from the South African Reserve Bank to 12% by some financial analysts. Job losses of between three million to seven million are anticipated, according to the National Treasury, depending on the length of recovery from the Covid-19 hard lockdown and pandemic. And tax authorities expect a collection shortfall of R285-billion in the current financial year (read: under lockdown the illicit economy costs public purse billions).

On 21 April, President Cyril Ramaphosa announced a R500-billion stimulus package (Hard lessons of hunger for the governing ANC – and a...) that would reallocate some R130-billion from national and provincial departments, and would mean approaching international financial institutions like the World Bank and International Monetary Fund (IMF).

Since mid-April Finance Minister Tito Mboweni has talked of bringing a special adjustment to February’s Budget sooner than later, grumbling about it being called a Covid-19 emergency Budget (Analysis: SA’s ‘emergency Budget’ in a Covid-19 crisis of lives and livelihoods).

But for Mboweni to table this Covid-19 Special Adjustment Budget, February’s budgetary allocations first needed to be adopted. The Public Finance Management Act (PFMA) allows changes to the Budget in specific circumstances, like “significant and unforeseeable economic financial events”, but only after the Budget is adopted.

When Mboweni closed Friday’s first reading debate he said as much. “We will be returning to you for a supplementary budget, which has been occasioned by recent developments” not only in South Africa, he said addressing the House via video link-up.

“What has changed? Well, the economy has gone into recession. Tax collection, and therefore the tax revenue, has declined very sharply. We therefore need to refocus our attention to what is possible…”

And for the finance minister that would be to “strongly recommend” an unprecedented turn to zero-based budgeting to his fellow Cabinet ministers and the president. Broadly speaking, zero-based budgeting means financial allocations start from nought, with all expenses having to be justified and only functions that pass scrutiny receive monies for a set period before the cycle starts again.

“We are no longer as rich as we used to think we are. So we have to adapt,” said Mboweni in calling for the brave implementation of structural reforms. “We must start from scratch. Prioritise infrastructure… reduce all expenditure we thought we could afford, but can’t.”

As the last speaker in that debate, Mboweni’s zero-based budgeting comments were left hanging. Perhaps the 24 June Special Adjustment Budget will provide answers.  

Getting there has been fraught - and given Friday’s parliamentary session, it looks set to continue to be. 

Ideological contestation within the governing ANC tripartite alliance contributed to South Africa missing earlier IMF board discussions of funding requests – like the R20-billion South Africa wants for Health to support its Covid-19 efforts.

In early April 2020, it was a no-no to approach the IMF and World Bank to “safeguard South Africa’s democratic national sovereignty”, according to the Alliance Secretariat statement after the meeting of the ANC, Cosatu and the South African Communist Party (SACP). Then on 7 May, the ANC National Executive Committee (NEC) decided to support such international financing approaches, according to its statement a day later: “We must look at accessing international loans and grants to complement (domestic efforts)…” But in early June the Alliance Framework agreement on a post-Covid-19 economic reconstruction and development argued for vetting of such agreements by the tripartite alliance.

At least one meeting of the Ministers’ Committee on the Budget, a key structure in the budgeting process, was delayed because of an ANC NEC meeting.

And then in a faux pas, National Treasury’s  2020 Special Appropriation Budget Guidelines of 14 May announced the date, even though it is for Parliament to do so. National Treasury backtracked quickly to say 24 June would be the date it “would be ready to table… The date of the tabling will be decided by the Speaker of the National Assembly in agreement with the President and Minister of Finance” (Parliament: Fierce Urgency of Now: Mboweni’s forceful push for Covid-19 emergency Budget). The timeline and deadlines were removed in the document posted on the treasury website.

The Budget was passed with the objections of the DA, EFF, Freedom Front Plus, African Christian Democratic Party (ACDP and UDM noted, in what echoed the first reading debate vote of 230 for and 120 against.