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MyMoney Online

'Mboweni’s plan is progressive. Departments must justify each cent from scratch'

22 June 2020 11:43 AM

"Zero-based budgeting is really progressive, given the kind of wasteful expenditure we’ve seen," says economist Sifiso Skenjana.

Finance Minister Tito Mboweni will on Wednesday table what may be the toughest budget in South Africa's entire history.

FILE: Finance Minister Tito Mboweni. Pictures: EWN.

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The lockdown has crushed the economy, destroying, perhaps, millions of jobs and leaving a gaping wound in the country’s kitty, near-empty even before the pandemic after years of looting and mismanagement.

South Africa is a radically different place to the one that existed in February when Mboweni tabled a R1.95 trillion budget.

The country is broke and falling deeper and deeper into debt.

President Cyril Ramaphosa seems to support Minister Mboweni’s calls for a “zero-based budget process” – i.e. starting the budget from scratch, meaning every line item must be analysed for need and cost; no funding may be assumed, no matter what happened in previous years.

In a zero-based budget, every Department will have to justify its expenditure from a “zero-base” – a massive undertaking.

Refilwe Moloto interviewed Sifiso Skenjana, Chief Economist at IQ Business.

Skenjana warns that, already, about 13% of South Africa’s entire budget goes towards servicing its rapidly ballooning debt.

Zero-based budgeting is really progressive… given the kind of fruitless, and wasteful, expenditure we’ve seen… ordinarily, you’d budget on last year’s numbers, probably with an inflation-based escalation… [With zero-based budgeting] every municipality or department must justify everything, and the following year it starts at zero again…

Sifiso Skenjana, Chief Economist - IQ Business

We estimate a budget deficit of 15%...

Sifiso Skenjana, Chief Economist - IQ Business

Social expenditure must continue. Infrastructure and capacity-building programmes must continue... Let’s spend our money where its best utilised… [Going into debt for building] infrastructure is ‘borrowing into growth’… a multiplier – one rand going into infrastructure results in R2.25 going into other pockets of the economy. It’s the kind of productive expenditure we’d like to see.

Sifiso Skenjana, Chief Economist - IQ Business

If we are borrowing to build capacity, we can reverse that number [proportion of SA’s budget that is spent on servicing debt] … The risk here is how much of it continues towards shoring up SOEs…

Sifiso Skenjana, Chief Economist - IQ Business

We’ve got to get a hold on the proportion that goes to the public wage bill…

Sifiso Skenjana, Chief Economist - IQ Business

Listen to the interview in the audio below.


22 June 2020 11:43 AM

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