Government spending is the overriding concern of businesses in South Africa, says Busisiwe Mavuso, the chief executive officer of Business Leadership South Africa (BLSA).<\/p>\n
Writing in her weekly letter, Mavuso said that a critical part of good fiscal policy is how to maximise the impact of economic growth on the state’s spending.<\/p>\n
She said that the assumption that overall spending is positive for the economy is not true – it’s about what money is spent on – and the government has spent the last decade spending money on things that actively hurt the economy.<\/p>\n
“The state capture years put immense pressure on National Treasury and led to a period of spiralling debt and extremely poor expenditure that delivered low value for money.”<\/p>\n
“At the worst points of the state\u2019s debt spiral, business becomes so worried that for each additional rand spent by the government, more than a rand was not spent by business. So increased state spending was harming the economy,” said Mavuso.<\/p>\n
Numerous bailouts of corrupt and inefficient state-owned enterprises were the most obvious pit into which public resources were poured. Still, there was just as much wasteful expenditure in the rest of government, where everything from local municipalities to entire provinces were failing to get audits signed off or follow legal procurement procedures.<\/p>\n
Last week National Treasury\u2019s acting director-general, Ismail Momoniat, and head of the budget office, Edgar Sishi, presented to Nedlac on their process leading to the medium-term budget expenditure speech due in October.<\/p>\n
According to the National Treasury’s annual budget review, total consolidated government spending for the next three years is estimated to amount to R6.62 trillion, which will be divided across various initiatives across multiple sectors, including social, infrastructure and development.<\/p>\n
Mavuso said that the budget has two purposes:<\/p>\n
“These are not necessarily the same thing \u2013 effective government means both spending oversight and allocating budgets to those parts of the public sector that can best spend it to achieve our desired outcomes,” said Mavuso.<\/p>\n
Fiscal policy, on the other hand, is tied to wider economic objectives, particularly how the economy is grown.<\/p>\n
Where spending should go<\/b><\/p>\n
“What really matters is what the money is spent on \u2013 we need the government to ensure infrastructure works,” said Mavuso. “Spending on infrastructure expands economic capacity, making it possible to grow employment and production.”<\/p>\n
The BLSA CEO said that business leaders have been frustrated that during a period of high commodity prices, the country has been exporting less from its ports simply because there is not the rail and port capacity to support it.<\/p>\n
“The revenue windfall to the state could have been much larger had we invested appropriately at the right time,” said Mavuso.<\/p>\n
“The balance of spending shifted towards consumption rather than investment throughout state capture. That is now moving the other way, and I was pleased to see Finance Minister Enoch Godongwana saying last week that infrastructure spending is set to grow 30%,” she said.<\/p>\n
She said that this move is an appropriate objective for government spending. However, other policy needs to be lined up behind it, such as industrial policies that ensure we are manufacturing the goods that benefit from expanded infrastructure investment and so on.<\/p>\n