Finance Minister Enoch Godongwana wants future governments to be bound by a rule that says they cannot spend the country into a debt trap. By his own account, the rule only works if the politicians it is meant to restrain agree to keep it. That tension sits at the centre of the medium-term budget, and Parliament begins picking at it this morning.
What Treasury is proposing
When he tabled the medium-term budget policy statement (MTBPS) on 21 October, Godongwana said Treasury would soon publish a draft fiscal anchor policy for public comment, with legislation expected in Parliament next year. As Business Day reports, the plan is to write fiscal sustainability into the Public Finance Management Act as a standard. Each elected government would have to set its own fiscal objectives, spend within guardrails and stick to a fiscal plan.
Notably, it is not a hard number. Godongwana described it as “not a numerical anchor but a principled anchor”, meaning Parliament agrees that fiscal standards must be maintained and any new administration must produce a plan that meets them.
The admission
Speaking at an RMB breakfast in Cape Town last Thursday, the minister was unusually frank. The government of national unity broadly accepts the idea, he said, but it must first survive the legislative process, and its long-term strength will depend on how much power Parliament gives it.
Then he went further. “Populism is growing in this country,” he said. “I know, for instance, that if a combination of two parties I have in mind were to be in power, that fiscal framework and fiscal anchor would be up in the air.” Business Day read this as a veiled reference to parties such as the EFF and MK. He did not name them.
That is an honest statement of the risk. It is also a strange basis for a law. A fiscal anchor is supposed to hold steady when the political weather changes. If the minister who designed it expects it to be “up in the air” under a different coalition, then what Treasury is really building is a speed bump, not a wall. A speed bump can still be useful. It forces a future government to explain itself in public before it breaks the rule. But South Africans should be told which of the two they are getting.
The other side of the argument
Not everyone wants the anchor to be strong. The Institute for Economic Justice warns that the guardrails risk “legitimising austerity as law”. Its argument, quoted by Business Day, is that government “continues to chronically underfund services, persecute social grant holders and underinvest in critical infrastructure in the name of ‘stability'”.
That critique deserves a straight answer rather than a dismissal. Debt costs are real money that does not go to clinics, schools or water works. But so are the costs of underspending. The fair test of any anchor is whether it protects the public from reckless borrowing without becoming an excuse never to fix what is broken.
Why it matters this week
Parliament’s finance and appropriations committees are scheduled to hear from the Parliamentary Budget Office and the Financial and Fiscal Commission this morning, from 09:00 to 12:00, with public hearings on the revised fiscal framework and revenue proposals on Wednesday, according to EBNewsDaily’s morning briefing. These are committee assessments, not new budget decisions. They are still the first place where Treasury’s numbers and assumptions get questioned on the record.
The economic backdrop is not forgiving. At the same RMB event, RMB’s David Faulkner forecast inflation around 4% this year and next, Coronation economist Marie Antelme said corporate investment was still underperforming, and the IMF’s Tidiane Kinda put medium-term growth at 2%.
What to watch
MPs should push on three points. What exactly happens, in law, when a government misses its own fiscal plan? Who judges whether a plan “meets the standard”, and is that body independent of the Treasury that wrote it? And what protects basic service budgets, the ones municipalities lean on, if the guardrails tighten?
Next week South Africans vote in local elections. Those results will not change who sits in the national cabinet, but they will show which way the “balance of forces” Godongwana spoke about is moving. A rule that depends on that balance is a rule voters are already shaping.
Sources: Business Day and EBNewsDaily, linked above.