Unshackle taxpayer from SOE disaster

Jacques Moolman, president of the Cape Chamber of Commerce and Industry

Finance Minister Enoch Godongwana’s 2023 budget illustrates a fundamental government failing – a dogged determination to prop up ailing state-owned enterprises. We heard only a few hints and promises of utilising the private sector better to deliver services that the government has clung onto for far too long.

There is no justification for the public sector to do any work which the private sector does better. And blocking this should be seen as devious.

In our view, the money spent trying to repair SOEs overshadows the positive aspects of this year’s budget. The financial life support given to SOEs is a further drain on public resources that would be better spent on other interventions.

We feel it is disingenuous to talk of “growth-enhancing reforms in energy and transport” when the most crucial reform required right now is to unshackle the taxpayer from the financial disaster that is Eskom and Prasa – and other failing SOEs.

We fear too much of the budget is dedicated to cleaning up self-inflicted wounds to the economy caused by bad choices.

Our own analysis suggests, notwithstanding SOE leadership changes, Eskom is degenerating and private sector-led growth in the energy sector can’t come soon enough. The percentage of energy availability factor per year reduced from 66.6% in the 2019/20 financial year to an estimated 57% in the 2022/23 financial year.

Regarding Eskom’s finances, we acknowledge the reality that government has no option but to absorb some of the debt in the form of another bail-out. But it is a sad indictment of the current leadership that in 2023 we are still spending our budget fixing that which should have been resolved many years ago – just to get back to where we were, rather than progressing.

The Chamber has similar misgivings about the infrastructure spend, which includes transport infrastructure – the most important issue affecting respondents in the Chamber’s recent Business Environment Survey.

According to Mr Godongwana, the public sector is projected to spend R903 billion on infrastructure over the medium-term. The largest portion of this, around R448 billion, will be spent by state-owned companies, public entities and through public-private partnerships.

Meanwhile, the budget’s single biggest expenditure (main cost driver) is the compensation of employees. The public-sector wage bill has been increasing in the past decade, with allocated expenditure being R437 billion in 2014 and the recently allocated expenditure being R701 billion in the 2023/2024 budget allocation, giving an increase of 60.3%.

However, the portion of the expense as a percentage of current expenditure decreased from an adjusted value of 31.8% in 2022 to 31.3% in 2023. Likewise, available figures for public-sector employment also show the total number of public-sector employees has been increasing, with the index figures for the total public-sector employment increasing from 89.2 to 104.5 from 2010 to 2021, showing a 17% increase.

We call on the president and minister to commit to making bold steps to create a lean and efficient public sector. This can be achieved by stopping the public sector from doing the work of the private sector. Truly care for the citizens.

While government insists its hands are tied regarding SOE bail-outs, it is hard to escape the conclusion that continued bail-outs will simply generate further liabilities and consume tax. Conversely, private-sector growth, including privatisation of these struggling SOEs, would generate tax revenue.

In summary, the Chamber feels the 2023 budget is more perplexing than pragmatic, and has the effect of deferring decisions that government can ill-afford to delay. Instead of spending on measures to strengthen our economic competitiveness to realise growth and exports, our money goes to fix the things government insisted on running, to the detriment of our national well-being. The budget speech wastes time making silly jokes about inflation sin-tax increases.

We are in a serious mess. Act as the leaders we require now.

The budget was not without redeeming factors. However, progressive steps like the solar-power rebates and refund of the Accident Fund Levy are merely token measures to assist private enterprises and small businesses in particular.

We believe government urgently needs more such measures and a broader commitment to good practice by supporting private sector pragmatic solutions to our current problems.