The one-of-a-kind alternative Budget breakdown event, held on Thursday at the President Hotel in Bantry Bay in Cape Town, stayed true to its promise of breaking down what the first Budget under the watch of new President Cyril Ramaphosa meant for ordinary South Africans. In fact, senior members of the opposition, the Treasury Director General, the head of Standard & Poor’s Ratings for sub-Saharan Africa and 10X Investments’ chief executive Steven Nathan gave Capetonians a lot more than they bargained for as they tackled the Budget and, sometimes, even had a go at each other.
Richard Poplak, the Daily Maverick’s master of irony and analysis, ran both panel discussions in what must have been the week’s most compelling ground-up Budget breakdown.
Both panels at the event acknowledged that the general sentiment in the country was optimistic, with many people praising the Budget speech for its strong focus on fiscal consolidation and growth stimulation. Others are questioning whether the current “Ramaphosa bounce” has enough momentum to steer the country away from further downgrades and get us back on to a path of economic recovery. Yet others, especially those in opposition and civil society, are pushing back against a central pillar of the Budget, the VAT increase from 14% to 15%.
The no-nonsense first panel at the event comprised 10X Investments’ Nathan, Director General of Treasury, Dondo Mogajane, and Konrad Reuss, the head of Standard & Poor’s (S&P) ratings agency for sub-Saharan Africa. Bringing together a diverse range of views, these three heavy-hitters did not always see eye to eye.
Addressing issues of governance and state capture head-on in the first panel, Treasury’s Mogajane conceded that South Africa had been heading into trouble towards the end of 2017.
“In October last year, things were bad. Growth was stifled, state capture issues came out in the open, and the country was at its lowest ebb. As such, this was a budget to reset what needed to be reset,” he said.
Whether or not this would be effective was, however, questioned by Konrad Reuss of S&P. “We are closer, but there is still much that has to be done.”
Reuss added that S&P is the most conservative ratings agency, and “we would have to see two upgrades to get back to investment grade”.
When asked how bullish he was feeling following the Budget, Nathan’s view was somewhere between those of his two fellow panel members. “In absolute terms, things are still very concerning, but what is encouraging is the progress that is being made from a relative perspective. The rand has strengthened significantly, the ALSI Index has improved by roughly 6%, and we are a lot more comfortable today than where we were three months ago.”
Nathan pointed out, however, that people tend to have very short memories. “If you go back to, say, 1956 as an example, a rand invested in the JSE, adjusted for inflation, would be worth something like R130 today. If you had invested that same rand in cash or the bond market, your R1 would only be worth around R3. This shows that despite periods of extreme uncertainty, the resilience of the South African economy has actually been quite staggering.”
While this was encouraging, Nathan reminded the audience that, like investing, the success of the country was a long game.
“One thing that we have lacked as a country is a proper and credible long-term plan that we can all get behind. There is no quick-fix solution. However, if the correct measures are put in place now, we will be able to work towards a more secure and inclusive future.”
Nathan also struck a chord during this discussion when he talked about mistakes made when the early BEE deals were treated as if BEE was a tax for the apartheid past, rather than an opportunity to positively impact on the future.
The audience was given much else to chew on, from background information from the DG on how Budget decisions are made and by whom, to the view from the top of the global ratings agency.
This discussion was followed by a second session, which saw the DA's deputy shadow for finance, Alf Lees, and the president of the UDM, General Bantu Holomisa, offer a compelling opposition response to the Budget. As might have been expected, these two opposition stalwarts pulled no punches. They gave scathing criticism of the ruling party with plenty of facts, figures and suggestions of how it could be different. So robust and playful was their criticism of each other and the lot at the top that the men and women in red overalls were hardly missed at all although one hopes they won’t disappoint again by not being available to take part next year.
So what should the ordinary South African have taken away from it all?
"Stretch your rands" was the advice given by Treasury DG Mogajane. He encouraged living within one’s means and gave the example that if someone needed to buy a car, they should buy one that was good enough to get from A to B. Now is not the time for Rolls-Royces, he explained.
"Invest in a long-term high equity fund to build wealth for the future," was the advice from Nathan.
“Support small and innovative businesses,” seemed to be a consensus view. It is a rare thing to see politicians from opposing parties, CEOs and finance experts agree on something. However, all speakers were in favour of helping SMEs thrive by cutting back some of the red tape that surrounds them and helping to create an environment where they will thrive.
As Steven Nathan said frankly: "Big businesses are not the creators of jobs, small businesses are the ones driving up the employment rate."
Expect the Budget Breakdown event, which puts the focus on smaller businesses, particularly disruptors, to become a fixed item on the calendar for those who really want to know what the hell is going on when the great and the good, the corrupt and the captured come to Cape Town and play havoc with traffic around Parliament.
