No frills, no fancies — Godongwana’s speech was a blunt instrument to stabilise state's foundering ship

22 Feb 2023

Stripped of plants, allegories, literary quotes and Bible verses, the 2023 Budget was blunt — a stable finance framework for savings, investment and growth, structural reforms, particularly in energy and transport, and improved state capacity for public services and to fight crime and corruption.

Opposition parties criticised the R254-billion debt relief for Eskom, but as South Africa must deal with the rolling blackouts that cost the domestic economy up to R899-billion a day, it was difficult to be awfully vocal about it.

On Budget Day, Stage 6 rolling blackouts left South Africans without electricity for 10 hours, after scheduled power cuts hit South Africans every day in 2023. There were more than 200 days of rolling blackouts in 2022.

Everyone knew tough choices and decisions needed to be made. As Finance Minister Enoch Godongwana said on Wednesday in his 2023 Budget speech: “This is not an austerity Budget. It is a Budget that makes tough trade-offs in the interests of the country’s short- and long-term prosperity.”

As always, the devil is in the details.

Spinning the R254-billion as debt relief for the troubled Eskom — R184-billion of this actually is a loan, according to the draft law — the Budget Review document makes clear the extent of Eskom’s haemorrhaging:

“Eskom’s operational failures are intertwined with its untenable financial position. Since 2008/09, government has provided the utility with R263.4-billion in bailouts. These allocations have failed to stem the collapse of Eskom’s balance sheet and operations. The utility imposes an enormous drain on the economy…”

The finer details are in the W3 annexe to the Budget documentation, and also in the Eskom Debt Relief Bill that Parliament’s appropriation committee must process.

For the “requirements of Eskom”, R78-billion is allocated in the 2023/24 financial year, R66-billion the next year and R40-billion in the 2025/26 financial year.

“The National Treasury must advance the amounts envisaged ... as a loan to Eskom on the dates determined by the Minister,” said the bill.

In addition, in the 2025/26 financial year Eskom gets R70-billion, “through a debt takeover arrangement as determined by the Minister”, according to Clause 2(3) of that Eskom Debt Relief Bill.

Conditions, according to the Budget Review, include implementing recommendations — including the electricity availability factor targets — of the international consortium that the National Treasury appointed to review Eskom’s coal fleet by mid-2023, and a design for new transmission infrastructure that allows “extensive” private sector participation.

But during Monday’s Eskom briefing, it emerged that the board-set target of restoring an energy availability factor of 60% by 31 March 2023 would be missed.

In its initial response on Wednesday, the power utility said: “Eskom welcomes and is grateful for the financial relief afforded by the government in the Budget statement. Eskom will study the details of the plan before it can make any announcement…”

Public Enterprises Minister Pravin Gordhan welcomed the Eskom debt deal and conditions.

“It must be highlighted that during the debt relief period, Eskom will not be allowed to borrow in the capital markets. Therefore, it is critical that they continue with the saving programme, and they drive efficiencies internally in order to reduce their cost base,” the minister said in a statement on Wednesday evening.

The trade-off is higher government debt — and repayment costs of 18 cents in every rand, according to Budget documentation.

Read all the budget news and analysis in one place

Solar subsidies

The devil is also in the detail of the solar subsidies for homes and businesses that President Cyril Ramaphosa announced in his State of the Nation Address (Sona) earlier in February.

On Budget Day, that political promise lost some of its warmth.

While R5-billion is set aside for businesses to reduce taxable income by 125% of the cost of renewables in the next two years, it’s only a once-off in 2023 for private households. Only registered taxpayers can claim in next year’s filing season — and then for only 25% of the cost of just the panels, or a maximum of R15,000 per household on the production of a compliance certificate.

But the National Treasury, in its solar panel subsidy pamphlet, is clear that the household subsidy from 1 March 2023 for new, unused solar panels is “to maximise the use of limited government funds to get as much additional generation capacity as possible”.

EFF leader Julius Malema dismissed this as hot air, “It’s an elite approach. The incentives are a tax relief and if you are not in the tax system then you don’t qualify.”

The rooftop solar subsidy allocation, however, like the R13-billion inflation-related tax relief and the continuation for another 12 months of the monthly R350 Social Relief of Distress grant, are part of the wiggle room Godongwana got as the South African Revenue Service (SARS) collected just over R93-billion more than expected.

SARS, in a statement, said it would continue to do its bit, despite the tough economic climate, because “revenue collection remains the mitigating factor that allows for a stable fiscal framework”.

Business Leadership South Africa CEO Busi Mavuso described Godongwana’s offering as “a solid Budget”.

“[It is] balancing the need for extra expenditure in critical areas but with a strong focus on stabilising debt. We believe the markets will react positively in that he has addressed the country’s critical problem areas while retaining fiscal discipline.”

“Solid” was also used by organised agriculture, Agri SA.

“Minister Godongwana has understood the context in which the Budget was delivered. This is a critical moment for an agricultural sector that is being battered by load shedding. Only time will tell if government will meet the moment with the urgency it requires.”

The ANC welcomed what it described as a pro-poor Budget, highlighting the infrastructure spend of R903-billion over the next three years for anything from roads and logistics to water and sanitation.

“We believe some of these programmes will go a long way in addressing the issues of youth unemployment and more,” said ANC MP and finance committee chairperson Joe Maswanganyi in a televised interview.

Human Settlements Minister Mmamoloko Kubayi told Parliament TV: “It has been quite a good Budget ... We understand, as government, there is pressure and people need to survive, but there is a long-term plan that includes economic growth, infrastructure, plus crime-fighting.”

The ANC parliamentary caucus said: “Budget 2023 responds to the concrete conditions the country faces and sticks to policy priorities. The Budget is overall pro-poor and premised on cushioning the poor, working people and pensioners to withstand the rising cost of living.”

But ANC alliance partner Cosatu said it had hoped for more.

“Whilst there are some positive budgetary allocations, it is depressing to note that the Budget continues along the same neoliberal trajectory that has led to the current crisis,” according to the Cosatu Budget reaction statement. “It is self-delusional to believe that a timid Budget will spur the economy to grow and slash unemployment.”

DA MP and finance spokesperson Dion George took a similar view, describing the Budget as another missed opportunity.

“The truth is that there is nothing bold about this Budget. The minister has failed to announce any meaningful structural reforms that could drive economic growth, incentivise domestic savings, attract foreign capital, and protect vulnerable South Africans.”

Godongwana’s Budget speech over some 50 minutes was straight down to business, with no fancies. Dull even, like the red of his tie. Amid the political noise in the year before the 2024 elections, it was a moment of respite. DM

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