Latest / Drive with John Perlman / The Medium Term Budget Policy Speech unpacked

Transcript

The Medium Term Budget Policy Speech unpacked · Drive with John Perlman

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  Speaker 1: You're with John Perlman on 702. Right, let's focus our
• 0:06
  Speaker 1: attention now on what we heard today from the Finance Minister,
• 0:11
  Speaker 1: Enoch Godungwana. The medium-term budget policy speech delivered today some
• 0:16
  Speaker 1: good news in terms of relief on fuel prices, and
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  Speaker 1: it would seem government has more money to spend. Debt
• 0:24
  Speaker 1: is down, and because our debt levels are down means
• 0:28
  Speaker 1: that we have more money that could be spent on
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  Speaker 1: doing positive things in the country. As you can hear, though,
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  Speaker 1: in my voice at least, there's always a but around
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  Speaker 1: some of these things. Let's look at the balance then.
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  Speaker 1: Some good news, but also some things that have a
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  Speaker 1: rather familiar look about them. Let's welcome to 702 Drive,
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  Speaker 1: Kai Satole, Director at Karuska Consulting. Kai, welcome and thanks
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  Speaker 1: very much for giving us your time. We've heard these
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  Speaker 1: things before, I think it's fair to say. that there
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  Speaker 1: is more money to spend. SARS has done better. We're
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  Speaker 1: spending less money servicing debt. And yet, it's hard not
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  Speaker 1: to look back on other big plans that have been
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  Speaker 1: announced before. For example, we were going to get lots
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  Speaker 1: more police officers, and that didn't happen because of problems
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  Speaker 1: in the delivery. Do you think there's a measure of
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  Speaker 1: frustration for the finance minister himself that they do manage
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  Speaker 1: to come up with more money, they do manage to
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  Speaker 1: run a fairly tight ship, and yet in the delivery
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  Speaker 1: that doesn't always pay off?
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  Speaker 2: Good afternoon, and good afternoon to the listeners. So I
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  Speaker 2: think there is indeed an element of frustration at how
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  Speaker 2: slow and bureaucratic processes tend to be when you're dealing
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  Speaker 2: with public resources today. And of course, for a good
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  Speaker 2: reason in that you do want to ensure that everything
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  Speaker 2: is sufficiently interrogated before it gets rolled out. But in
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  Speaker 2: instances where some of those delays actually mean that by
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  Speaker 2: the time the rollout happens, new issues have emerged or
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  Speaker 2: the impact of those resources has been diminished, it is disappointing.
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  Speaker 2: I think the one good example that we also heard
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  Speaker 2: today was that the minister reflected on the fact that
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  Speaker 2: over $ 800 billion has been allocated to infrastructure municipalities and
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  Speaker 2: yet those projects get delayed, service delivery does not materialize,
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  Speaker 2: and that has forced them to actually rethink the entire
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  Speaker 2: process of allocating grants at that level because you could
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  Speaker 2: say that if you spend $ 800 billion somewhere, you should
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  Speaker 2: be able to see the effects of it And if
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  Speaker 2: the effects of it are much less than what you
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  Speaker 2: thought they should have been or the impact is much
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  Speaker 2: lower than it should have been, then it can only
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  Speaker 2: lead to a sense of frustration.
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  Speaker 1: Yeah, I mean, I'm just looking at one example of
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  Speaker 1: what I was perhaps suggesting. Gender-based violence and femicide, obviously
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  Speaker 1: a massive national problem. 3.8 billion rand will be allocated
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  Speaker 1: to hire more than 3,500 social workers. I mean, first
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  Speaker 1: of all, do we have 3,000 workers? 500 social workers,
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  Speaker 1: I'm not necessarily expecting you to know the exact number,
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  Speaker 1: but would the minister have checked that before giving this undertaking?
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  Speaker 2: Well, I would have hoped so, because ultimately, if you
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  Speaker 2: are in a position to even cost it at that
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  Speaker 2: level of determining that The $ 3. 8 billion would enable us
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  Speaker 2: to hire a specific number. You should have some insights
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  Speaker 2: into the qualification and the skills and the cost per
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  Speaker 2: individual to be deployed. So at least at that level,
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  Speaker 2: there should be some idea. Now, the question of the
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  Speaker 2: recruitment of those individuals and, more importantly, the allocation of
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  Speaker 2: those individuals across the country in spaces where there are
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  Speaker 2: the most acute demands, that is something that the Department
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  Speaker 2: of Social Development has to obviously oversee. And we are
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  Speaker 2: hoping that we do not again get stuck in the
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  Speaker 2: bureaucracy of long recruitment processes and then a suboptimal allocation
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  Speaker 2: of resources where individuals that should ideally be placed in
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  Speaker 2: a space where there's a shortage aren't able to be
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  Speaker 2: placed there either because at the local or sub-national government level,
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  Speaker 2: the readiness to essentially absorb them isn't there. So there
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  Speaker 2: are many more intersectional issues that emerge. The allocation is
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  Speaker 2: simply the starting of the conversation. We need to then
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  Speaker 2: have an understanding of what is the roadmap towards ensuring
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  Speaker 2: that this does indeed get implemented.
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  Speaker 1: Let's go back to the concessions or the support offered
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  Speaker 1: around the fuel price. Is this something that can be sustained?
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  Speaker 1: I mean, it's been done before. There's always the hope
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  Speaker 1: that the global circumstances will change. But if they don't,
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  Speaker 1: I mean, presumably this can't be done for very long.
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  Speaker 2: Unfortunately, it cannot be done for long. And there is
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  Speaker 2: actually a bit of a history behind the number that
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  Speaker 2: we heard today. So we heard today that 10 billion
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  Speaker 2: rand is what the National Treasury estimates it will cost
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  Speaker 2: for them to do this. But what had happened is
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  Speaker 2: that early in the year when it became clear that
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  Speaker 2: the conflict was going to be a bit more prolonged
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  Speaker 2: than anyone had hoped for, National Treasury did indeed go
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  Speaker 2: to Parliament and they asked to get an additional appropriation
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  Speaker 2: of 10 billion rand from the National Revenue Fund, which
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  Speaker 2: is the big pot, which they then said must go
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  Speaker 2: to the Central Energy Fund so that the Central Energy
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  Speaker 2: Fund has some buffer to be able to absorb some
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  Speaker 2: of the shocks associated with this. It is now that
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  Speaker 2: same R10 billion that is now simply being removed from
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  Speaker 2: the Central Energy Fund, being taken back to the National
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  Speaker 2: Revenue Fund, which is why it's only been able to
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  Speaker 2: commit to one month at a particular level and then
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  Speaker 2: another month at a lower level. So until there is
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  Speaker 2: an additional injection that's going to cover the hole that emerges,
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  Speaker 2: that relief is definitely temporary.
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  Speaker 1: In terms of policy changes, is there anything that the
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  Speaker 1: minister spoke about that caught your eye, Kaya? I mean,
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  Speaker 1: it may well be policy changes that are being looked
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  Speaker 1: at or changes that are imminent. What should we be
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  Speaker 1: expecting down the track and might it make any kind
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  Speaker 1: of difference?
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  Speaker 2: Well, I think the big statement that emerged from today
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  Speaker 2: is the fact that after many years of having implemented
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  Speaker 2: the PFMA and the MSMA, government has now decided that
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  Speaker 2: it is time to re-look at that legislation and understand
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  Speaker 2: the importance of that legislation because ultimately it is the instrument.
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  Speaker 2: with which we tend to oversee how public resources are deployed.
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  Speaker 2: So the idea that we need to relook and interrogate
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  Speaker 2: the efficiency or even the relevance or the appropriateness of
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  Speaker 2: those instruments now that we've learned how they've been operating
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  Speaker 2: since 1999 in the case of the PFMA, that's an
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  Speaker 2: important conversation that will require absolutely every single stakeholder to
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  Speaker 2: make some input so that we do emerge with legislation
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  Speaker 2: that is more appropriate. for the realities that we live.
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  Speaker 2: So I think that was the first one. The second one,
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  Speaker 2: of course, is this idea that, well, actually it is
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  Speaker 2: infrastructure where we should be focusing because infrastructure not only
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  Speaker 2: results in us creating new things, but also when it
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  Speaker 2: employs people, it then enables us to be able to
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  Speaker 2: deal with the unemployment crisis. So focusing on infrastructure and
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  Speaker 2: ensuring that infrastructure is deployed appropriately is an important multiplier,
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  Speaker 2: has got an important multiplier effect. So it is quite
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  Speaker 2: important to ensure that we do find a way of
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  Speaker 2: making it happen much faster and much more efficiently than
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  Speaker 2: what has happened before. So I do think we need
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  Speaker 2: to be able to pay specific attention to those conversations.
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  Speaker 2: And I think the last one for me was the
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  Speaker 2: issue of the national online gambling tags because we now
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  Speaker 2: know that we do have an emerging social crisis in
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  Speaker 2: relation to the prevalence of all of these unregulated and
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  Speaker 2: under-taxed online gambling platforms that have got significant social impacts
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  Speaker 2: that have not yet been really understood. So it's important
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  Speaker 2: for us to start seeing policy moving towards deterring and
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  Speaker 2: addressing those issues.
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  Speaker 1: We've been having conversations with political parties and listeners weigh
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  Speaker 1: in as well in a constant thread. in advance of
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  Speaker 1: the local government elections next month, Kai, has been the
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  Speaker 1: way government money gets wasted. And I'm struck by what
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  Speaker 1: the minister said, that they've been on a campaign to
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  Speaker 1: look for where there are underperforming and inefficient programs, also
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  Speaker 1: looking at administrative inefficiency and fraud. And he talks about
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  Speaker 1: R38. 1 billion in has been identified and there was 12
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  Speaker 1: billion identified through a similar exercise in the 2026 budget.
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  Speaker 1: I mean, that's a lot of money and I'm wondering
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  Speaker 1: whether that kind of action can be sustained over time.
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  Speaker 2: Unfortunately not because what tends to happen is that you
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  Speaker 2: have a department or a government agency that has requested
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  Speaker 2: a particular allocation on the understanding that they will execute
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  Speaker 2: on a particular program of action. Now, what tends to
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  Speaker 2: then materialize is that not everybody is always capacitated in
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  Speaker 2: order to be able to make use of those resources.
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  Speaker 2: So then you end up at the end of a
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  Speaker 2: particular period with money that has not been utilized and
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  Speaker 2: then simply say, well, because you haven't been able to
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  Speaker 2: do the thing that you said you're going to do
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  Speaker 2: with these resources, we now need to bring them back. Unfortunately,
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  Speaker 2: if those particular plans were indeed realized, um you know
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  Speaker 2: founded on on on proper fundamentals it will mean that
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  Speaker 2: ultimately there are still things that need to be done
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  Speaker 2: activities that need to be undertaken and perhaps it will
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  Speaker 2: be when a new team or new bureaucrats are in
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  Speaker 2: place that they then say actually we should have been
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  Speaker 2: able to use those resources in order to do this
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  Speaker 2: particular activities then they may in the long run ask
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  Speaker 2: for those resources to be redeployed to them. So it's
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  Speaker 2: not a matter of, you know, somebody did do the
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  Speaker 2: work and it turns out that they did it so
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  Speaker 2: efficiently and so cheaply, they've got excess resources to return.
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  Speaker 2: It's usually because the work wasn't done for a variety
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  Speaker 2: of reasons.
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  Speaker 1: I mean, I'll just read one example. 7.8 billion ran
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  Speaker 1: from the Human Settlements Development Grant, where program inefficiencies, and
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  Speaker 1: this phrase caught my eye, and rent-seeking means that we
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  Speaker 1: are spending less on building houses. Rent-seeking certainly borders on
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  Speaker 1: the illegal and probably is. I mean, the good news
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  Speaker 1: is I suppose they're getting that money back, but the
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  Speaker 1: bad news, I guess, with all this clawing back of
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  Speaker 1: cash not being used properly, we certainly need houses. It
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  Speaker 1: probably means there's less money for that. A double-edged sword?
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  Speaker 2: Yeah, exactly, because the conversation doesn't start off by saying, wait,
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  Speaker 2: hold on, we thought we were going to build 10,000
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  Speaker 2: houses at this particular cost. We've been able to do
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  Speaker 2: so at a cost that is less than that, so
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  Speaker 2: therefore that's how we bring the money back. The conversation
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  Speaker 2: generally is, actually, there have been some bottlenecks. We haven't
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  Speaker 2: been able to do this properly. Or alternatively, there have
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  Speaker 2: been so many problematic issues in how the procurement processes
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  Speaker 2: were being put together. Or indeed, when we talk about
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  Speaker 2: rent seekers, it's when you can see that actually we're
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  Speaker 2: employing middlemen. We're not engaging with the people who are
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  Speaker 2: going to be doing the actual underlying work. So in
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  Speaker 2: instances where somebody says, actually, this makes no sense and
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  Speaker 2: this is not valuable money, they'd rather not spend it.
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  Speaker 2: But the problem is that the original problem statement is
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  Speaker 2: that the housing... on facilities or even the service have
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  Speaker 2: still not been delivered. It's simply because of all these
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  Speaker 2: other issues that have made it difficult that that is
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  Speaker 2: the basis for the money being returned. It's not because
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  Speaker 2: we've done it so efficiently that there's excess money to
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  Speaker 2: be returned back to the state.
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  Speaker 1: Oh, so much to consider, but thank you. We made
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  Speaker 1: an excellent start, I think, with my guest, Kai Satole,
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  Speaker 1: Analyst and Director at Kariska Consulting. 28 minutes past five o'clock.