A radical relook of South Africa's spending is absolutely necessary. If South Africa doesn't voluntarily cut back now, it won't be pretty when it's squeezed into a corner, writes Qaanitah Hunter.
If South Africa were a person, it would be a 31-year-old who earns a decent income but has made such poor financial decisions that they are drowning in debt with no clear way to earn more.
This 31-year-old wasn't always bad with money. For the first 20 years of his life, he managed his finances wisely.
He spent carefully, building for the future. He was smart about his finances, and by the end of each year, he had a surplus.
But things took a turn in his twenties. By the time he was 21, he started spending recklessly. He stopped prioritising his needs and just spent. When he ran out of cash, he took out loans. Unfortunately, he didn't use the loans for their intended purposes. He lost money, and some of his friends even took advantage of him. He bought cars on high-interest credit and then wrote them off. It was a mess.
Now, at 31, paying back the money he borrowed and squandered is a nightmare. For every R100 he earns, R21 goes just to servicing the interest on his loans - leaving little to pay down the debt itself. His income barely covers his basic needs, let alone the mountain of unnecessary spending he's become accustomed to.
So, what now?
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This 31-year-old has three options: Earn more, borrow more, or cut his spending. He can't earn more. He's exhausted all available options. The only way he could make a little extra is by squeezing those around him - a poor choice. He can't borrow more, either, because that would only increase his debt burden. The more he borrows, the higher the interest costs, meaning even more of his income would go toward servicing debt.
The third option is to cut spending. But he doesn't want to do that. He's used to the comforts of his lifestyle, and cutting back feels like too much effort.
In short, he's in a financial bind. Something has to change. For the adults in the room, cutting expenditures and spending more wisely is the obvious answer. What if he returned some of the unnecessary cars and used that money to pay off debt? Does he really need two houses? Get the picture?
When Finance Minister Enoch Godongwana tells his Cabinet colleagues - before informing the public - that we're out of options, he means it.
But even with that acknowledgement, the government isn't acting fast enough to reexamine the budget and make the necessary cuts.
Government won't come crashing down
The delay in last week's Budget presentation was unprecedented, but not a crisis. The bigger crisis is the failure to fully recognise how dire South Africa's fiscal situation is.
So, coalition parties threw their weight around? That's how coalitions work. The government won't come crashing down (at least not yet).
If ever there was a time for junior coalition partners to assert their importance, it was during the budget discussions. That's the main leverage in a coalition government. Ask the Germans, and they might shed a tear. When you don't have full power, you can't just spend however you want.
The ANC forgot that when Finance Minister Godongwana attempted to push through a 2% VAT increase. The ANC has been relatively good at power-sharing compared to other former liberation movements on the continent, but they sometimes suffer from selective amnesia about what 29 May means for them. A Budget in a coalition government must be negotiated.
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In practical terms, Godongwana is right: There aren't many options. The money raised from the VAT increase is meant to fund early childhood development centres, pay teachers, nurses, and doctors, refurbish Prasa's rail infrastructure, and provide above-inflation increases to social grant recipients.
The minister and the South African Revenue Service (SARS) commissioner, Edward Kieswetter, may debate whether VAT increases will actually boost the country's revenue.
The bottom line is that South Africa is earning as much as it can given current economic growth levels. The real issue is a spending problem. Godongwana's predicament is only critical if we refuse to take the politically uncomfortable step of slashing the Budget. Financial experts talk about zero-based budgeting. The finance minister isn't keen on that.
Re-examine budgeting process
If I were President Ramaphosa, I'd pass a Budget on 12 March and immediately initiate a process to reexamine the budgeting process thoroughly. This can't be another superficial initiative like the National Dialogue he keeps promising. This is about having a dedicated team scrutinising every line of government spending - not to impose austerity like the US is attempting, but to ensure funds are used effectively.
Take Proudly South African, a marketing company for the country, which isn't spending its budget while doctors remain unemployed. This has to change. We need to get creative. I participated in a panel hosted by PwC last Friday, where it was suggested that South Africa renegotiate its tariff share with neighbouring countries under the Southern African Customs Union (SACU), which was set in the early 2000s. The experts claim that we could reclaim more than the R90 billion we currently give away to our neighbours.
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News24 editor-in-chief Adriaan Basson suggested scrapping provinces. Others advocate for shutting down state-owned enterprises (SOEs).The point is that the time for theoretical discussions is over. Back to the 31-year-old analogy: If he doesn't get his act together, he'll lose everything. It's as simple as that.
It's a hard pill to swallow, but South Africa is living with the consequences of its reckless twenties. We can't afford to be precious about spending any more.
I believe rehabilitating South Africa's finances requires more than just the people who allowed the country to slip into this mess. Passing a Budget on 12 March is merely a box-ticking exercise.
A radical relook at spending is absolutely necessary. If South Africa doesn't voluntarily cut back now, it won't be pretty when it's squeezed into a corner. Just ask our friend Ghana how painful that can be.
- Qaanitah Hunter is an award-winning political journalist and author.
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