Later today, Minister of Finance Pravin Gordhan will table the Medium Term Budget Policy Statement (MTBPS) in the National Assembly. Normally, this is a virtual ‘run-of-the-mill’ speech, where the ministers gives an update on the budget speech he tabled in February this year, and what to expect in the budget speech of next year.
However, this speech will have a far greater importance. Between now and the next budget speech, there are a number of significant events that must be addressed in order to keep the economy afloat.
The first is the protests for fee-free higher education, commonly known as #FeesMustFall. These protesters will be outside the gates of parliament as the minister delivers his speech, and it will be interesting to see how the minister will address their demands, if he can at all. Providing free higher education is estimated to cost R20 billion, as provided by STATS SA here. It is difficult to see how the Minister will be able to cover the tuition fees, and further, the fee payment structure and the income streams of the universities will have to change, in order to accommodate this demand.
Further to this, the second (and knock-on) event will be student enrollment. If tuition fees are to be subsidised by the government, tertiary institutions will have less money at their disposal and hence will have to cut costs. One of those measure would be to curtail student enrollment (this would also be due to students finishing the 2016 year in 2017, causing less availability for the 2017 class). However, this might aid the higher education system, as in its current form, it is grossly inefficient. There are 400 000 (40%) more students in the system than it can handle, and when taking natural attrition into consideration, it’s still too much for the system to accommodate. The minister will need help from the higher education ministry in addressing this problem. Let’s hope he gets all the help he needs.
The third, and possibly most important, big event will be the revised outlook on our economy by credit ratings agencies in December. We managed to dodge a ratings downgrade in June of this year, and the minister has made every effort to avoid the same at the end of the year.
However, he has not been helped by various diversions, and not by his own doing.
Firstly, the fraud case brought against him by the National Prosecuting Authority and the Hawks. Every learned legal mind in the country has said that the charges are frivolous, weak and politically motivated at best. However, this move by the NPA will only be seen in a negative light by the ratings agencies and will not aid the cause of economic growth and freedom. The case is due to be in court on November 2, and I am sure that the minister will be vindicated.
Secondly, the increase in violence in the #FeesMustFall protests. The torching of cars and buildings has now overshadowed the foundation of the protest, and it is now losing popularity in the public eye. Clearly those behind the violence seek to bring the higher education system to a complete standstill, which can only stall the economy, and obliterate the chance for sustained economic growth.
Finally, the other projects that government want to execute will also need attention. Chief among these are the Nuclear build program, and the rehabilitation of South African Airways. The nuclear build program is expect to cost R1 trillion, while SAA will need at least R5 billion to stay afloat. The minister will have to decide whether these projects take precedence over poverty alleviation and job creation.
The destruction of the economic through physical and intrinsic means cannot be allowed, and the minister has to juggle these matters with the real fight for economic freedom, which affects the poor the most.
How is this to be done? Firstly, he has to continue removing obstacles to investment, by continuing to liaise with the business community, and implementing investment-friendly policies, as well as labour reform.
Secondly, fight the NPA and the Hawks in court. This should yield a resounding victory, which will further vindicate his stance against corruption, and solidify his status as the gatekeeper to the public purse.
Finally, on corruption, continue to seek answers on the questionable transactions of the Gupta family business. This family has sought to capture the state through the president, and they must be stopped if true economic freedom in South Africa is to be realised.