4 big steps the DA thinks will save Mboweni’s Budget

2020-02-25 05:00 - Khulekani Magubane, Fin24
SA Minister of Finance Tito Mboweni delivers his m
SA Minister of Finance Tito Mboweni delivers his medium-term budget speech on October 24, 2018, in the South African Parliament in Cape Town (RODGER BOSCH/AFP/Getty Images) ~ AFP

Members of the Democratic Alliance Geordin Hill-Lewis and Leon Schreiber have recommended four reforms they say Minister of Finance Tito Mboweni must consider, if his 2020 Budget Speech is to have any hope of sparing South Africa a credit downgrade or further economic turmoil.

The proposals include electricity reforms, as well as legislation to stabilise debt, reduce spending and stabilise current expenses.

The opposition MPs said they agreed with much of what Minister Mboweni has tabled in his previous budgets, but in their view, the rest of government lacked the commitment to see it through.

The MPs said they were not optimistic that reforms suggested by themselves or Mboweni himself would be implemented by National Treasury, as those opposing the reforms in the African National Congress were worsening the "credibility gap", which rendered the finance minister's work untenable.

Stop feeding 'zombies'

Schreiber said government could achieve an adjustment of R349.95 billion over the medium-term expenditure framework period, if it committed to turning its back on giving embattled state-owned entities unending bailouts.

"The DA's plan to stabilise the budget deficit and the national debt will be achieved through significant cuts in the public wage bill that the minister has called for, but has not shown progress in delivering, as well as stopping bailouts to failing zombie SOEs," said Schreiber.

Schreiber said the fiscus could, in this way, enjoy R33 billion in recoveries from Eskom, R1 billion in recoveries from Denel, and R1.1 billion in recoveries from the South African Broadcasting Corporation in the 2020-21 financial year alone.

Power generation incentives

Hill-Lewis said the DA was calling for an Emergency Solar Rebate, which would offer tax rebates to residential properties that installed solar systems on their properties. He said this would incentivise proactive measures to ease the pressure on Eskom.

"This Emergency Solar Rebate would be available for three years only, designed to alleviate our current energy crisis. It would allow for a 100% tax deduction for the cost of installed solar equipment, up to a maximum of R75 000," said Hill-Lewis.

Hill-Lewis said the purchaser could fund the cost of installation upfront and could then claim the costs against their taxable income when they submit their ordinary annual income tax returns.

Plug the public service vortex

Schreiber said freezing the wages of 33.7% of public servants not covered by occupation-specific divisions, including managers and supervisors, would yield R138.6 billion in adjustments for the national fiscus. He said a freeze on appointments would free up an additional R29.4 billion.

"We can achieve the cuts we need while protecting hard-working public servants. A third of public service is management and administrative staff and they must face the freeze because that is where the highest increases have been," Schreiber said.

He said any headcount reductions implemented in the public service should only affect management and administrators, as they have seen the sharpest salary increases in recent years. He maintained that ordinary public servants should be protected from any freeze on raises.

Legislation

The DA also announced plans to table the Fiscal Responsibility Bill at the legislature on Monday morning, which they said contained measures which would contain fiscal debt. 

The Fiscal Responsibility Bill provides for a rule stipulating that from the financial year 2020/-21 to the financial year 2023/24, net loan debt as a percentage of GDP may not exceed the net loan debt of the previous year.