MTBPS – Adjustments and allocations, but who benefits?

The MTBPS primary aim is to state the policy direction that government has taken. However, as part of the MTBPS there are adjustments made to budgets which provide us with an indication of how government uses these adjustments to support its objectives.  Here is the run down of the major adjustments to the 2011/12 budget.

Government will spend about 9 billion less than anticipated

The National Treasury notes that

Taking into account funding set aside in the contingency reserve at the time of the 2011 Budget, projected underspending, savings declared by departments and the adjusted state debt cost estimate, the revised estimate of total expenditure in 2011/12 is R888.0 billion. In February 2011 at the tabling of the budget, provision was made for expenditure of R888.9 billion for 2011/12. (Page 34, MTBPS, 2012)

Under spending by government departments has largely come under control, but with local government’s still struggling to spend funds on infrastructure and other projects. Spending performance by government has however improved over the years, but this remains an area that needs to be urgently tackled. In an environment of low economic growth, there could have been a range of ways to spend all or part of the R 9 billion budgeted. For instance, additional funding could have been provided to the Jobs Creation Trust or to a number of other programmes.

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Less government spending, and what the National Treasury intends doing to improve the situation

MTBPS pic on zapreneur. http://zapreneur.com/dev
Does the MTBPS have the right toolkit?

Minister Pravin Gordhan in previous budgets put in place a counter-cyclical strategy to support South Africa due to the impacts of the global financial crises. The recovery in the South African economy has not been as robust as anticipated raising significant challenges. Our economic growth is sluggish and non-interest spending is declining, painting a worrying picture going forward.

Economic Growth

South Africa’s economic growth is more like the developed world, than emerging economies, according to the MTBPS. South Africa is thus projected to underperform in comparison to its peers in other emerging economies and lags behind developing Asia. The choices made by government in the MTBPS will unfortunately continue this trajectory.
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MTBPS-More continuity, when change is needed

The National Treasury argues that:

The measure of a strategy is not in the breadth of objectives it seeks to address, but rather in its focus on those objectives that really matter. Fiscal constraints force government to choose carefully between competing objectives.

MTBPS pic on zapreneur. http://zapreneur.com/dev
Does the MTBPS have the right toolkit?

This provides a benchmark against which to assess the Medium-Term Budget Policy Statement (MTBPS). The common sense approach is to focus on the level of the deficit. On the one hand, the financial markets will welcome the attempts to reduce the deficit over the medium term, whilst raising concerns about the current perception that debt is high. On the other hand, civil society organisations will argue that more needs to be done, but the deficit will be an indicator that government is attempting to do something during this downturn. There are important public policy choices in this debate, with the National Treasury providing an important input in the Fiscal Guidelines.
However, there is a foundational question – Are the objectives the right one’s? Or more crisply, is the underlying strategy the correct one? To place, this in context South Africa lags behind its peers in terms of economic growth.
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Jobs Fund Update from the MTBPS

The Jobs Fund - National Treasury funds, DBSA implements

Minister Pravin Gordhan provided a couple of details on Jobs Fund launched on the 7 June 2011. In the past five months, there has been a call for applications and a letter send to applicants indicating the process to be followed. Minister Gordhan indicates that 2 651 applications were received in the first call for proposals, with it:

illustrating the demand, innovation and desire across both the private and public sectors to create jobs,

according to Minister Gordhan.

The applications received covered enterprise development, support for work seekers, infrastructure investment and building institutional capacity. The outcome is that projects to the value of R 352 million has been allocated, with the prospect of creating 115 226 jobs.

Economic Freedom and Fiscal Policy – Previewing the Medium-Term Budget Policy Statement 2011

MTBPS pic on zapreneur. http://zapreneur.com/dev
Does the MTBPS have the right toolkit?

As Minister Pravin Gordhan delivers governments Medium-Term Budget Policy Statement (MTBPS) for 2011, the debate on economic transformation is gathering pace. In the same week, as the MTBPS is announced both the African National Congress Youth League (ANCYL) and the Young Communist League (YCL) will hold events focussed on economic transformation. These are separate events, and speak to the broader political positioning that sadly is becoming a permanent feature of the African National Congress.
The strategists at the National Treasury will have to consider these events, but will also have to look towards how the market will react.  The biggest challenge is that rating agencies have raised concerns about the level of government debt. Whatever one may think of the ratings agencies – who contributed to the global financial crises by providing good ratings to dubious investments – they wield power within the market, which in turn impacts on investment choices. Moreover, South Africa will be borrowing to finance primarily the expansion of power stations, but potentially in other areas as well. In other words, the perceptions of rating agencies and larger private companies matter. Their opinion should matter less, but the reality is that they have a powerful set of mechanisms to influence public policy and to ultimately impact on economic growth.
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Is Tim Ferris killing Main Street? Reviewing the Four Hour Workweek

Book Cover - 4 Hour Workweek on ZapreneurTim Ferris weaves a mixture of a self-promotional story and business strategies with the promise of working four hours a week. He counterpoises the four-hour workweek, with the forty hour workweek. In so doing, he unwittingly raises the question – Can entrepreneurial activity still contribute to economic growth and job creation?
The American distinction between Main Street (representing small business) and Wall Street (representing financiers and investors) offers a way to understand this question. It is a theme being played out in the Occupy Wall street, with many local campaigns being undertaken. In the wake of the financial crises, we have justifiably criticised Wall Street for making easy money, for trading nothing (i.e. paper) and for screwing up the world. Main Street in turn is the saviour, the engine of innovation and job creation. Yet, it is possible to create businesses that mimic the worst traits of Wall Street – no jobs, no real products, and no innovation – and dress it up as Main Street. This is my reading of The Four Hour Workweek – a manifesto to create personal gains, without the multipliers (e.g. economic growth, job creation) associated with small business.
Tim Ferris provides the scope for his book as follows:
“The vast majority of people will never find a job that can be an unending source of fulfillment, so that is not the goal here; to free time and automate income is.”
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