Good parenting means setting aside differences

In recent years, the South African government has faced numerous economic challenges, including balancing budget constraints with the need for inclusive development and effective public transport systems. SHARMINI NAIDOO points out that a balanced investment in all modes of transport is vital.

Leadership is defined as a person’s ability to motivate those around them toward a shared vision. It involves a form of power that enables one to influence the values, beliefs, behaviours, and attitudes of others, and the quality of leadership is a key factor in a country’s economic growth. Leaders’ decisions impact both short-term and structural policies, which in turn play a critical role in a nation’s growth and sustainability.

Economic growth refers to the increase in goods and services that improve lives and promote happiness over time, and is central to the development and well-being of a country or community.

Since the formation of the Government of National Unity (GNU) over 100 days ago, South Africa’s economy has shown signs of resilience. In October, BusinessTech reported that the rand had strengthened by 7.5% to reach a 20-month high, the bond market had improved by 11%, and the Johannesburg Stock Exchange’s main index had risen by over 10%. 

Investors are optimistic and the GNU’s cooperative approach appears to be paying off, with parties and leaders – much like good parents – seeming to have set aside their differences for the country’s benefit.

The GNU’s strategy focuses on fostering inclusive growth and job creation, reducing poverty, addressing the high cost of living, and building a capable and ethical developmental state.

In late October, finance minister Enoch Godongwana presented the 2024 Mid-Term Budget Policy Statement (MTBPS). The MTBPS, or “mini-budget”, enables government departments to request budget adjustments, rollovers, and additional funds for unforeseen expenses. It also establishes the policy framework for the annual budget presented in February and updates National Treasury’s economic forecasts.

The mini-budget is essential in the budgetary process, as it establishes the fiscal framework for the next national budget. The Parliamentary Monitoring Group also notes that the mini-budget provides Parliament and the broader public with insights into Treasury’s view of the current economic situation.

This year’s MTBPS outlined a clear strategy to grow the economy, maintain public financial health, and build a more inclusive South Africa, with the ultimate aim of realising the ideal of a “better life for all”. While the government achieved a primary budget surplus in 2023/24 for the first time in 15 years, a budget deficit of 4.7% of GDP is projected for 2024/25, up from 4.5% in the February budget.

National Treasury has revised down its GDP growth forecast for 2024 from 1.3 to 1.1%, with anticipated growth of 1.7% in 2025 rising to 1.9% by 2027. Meanwhile, South African Revenue Service (SARS) tax revenue collections are expected to fall R22.3 billion short of previous estimates, reducing the main budget revenue estimate by R31.2 billion over the next two years. Government debt is expected to exceed R6.05 trillion (or 75.5% of GDP) by 2025/26.

These fiscal constraints raise questions about the feasibility of funding a public transport subsidy policy – estimated to cost around 5% of GDP, or about R230 billion.

The draft public transport subsidy policy (DPTSP) currently under review by the National Economic Development and Labour Council (NEDLAC) emphasises the role of municipalities in developing transport plans, contracting operators, and owning all public transport vehicles. However, the finance minister highlighted in the MTBPS that many municipalities face significant governance, planning, and financial challenges. Of the 257 municipalities in South Africa, 50 have active financial recovery plans and three are under national intervention. Imposing additional responsibilities on these municipalities seems impractical and could further deplete their already strained resources.

It is also expected that over the next three years, 30.6% of the population will receive some form of social grant (excluding the Covid-19 relief grant). This increase in grants must be funded through permanent revenue sources or within the existing fiscal framework. The DPTSP proposes a direct subsidy for people living at or below the poverty line, likely administered through the national social grant system. However, it is uncertain whether the proposed public transport user subsidy is already included in these estimates, given that the policy has not yet received Cabinet approval.

Despite a lack of research to support the proposal – and contrary to international best practice – the DPTSP suggests that operator subsidies (supply-side subsidies) tend to be either neutral or regressive, while user-targeted subsidies (demand-side subsidies) are more effective at promoting equity. It thus concludes that demand-side subsidies are more beneficial for developing countries.

The South African Bus Operators Association (SABOA) has been actively engaging with the National Department of Transport since the DPTSP’s inception. However, a recent one-day engagement still did not fully address SABOA’s concerns. The association has emphasised that the draft policy’s high-level structure, based on outdated data, hinders an accurate impact assessment for the bus industry. SABOA is now part of the Business Unity South Africa (BUSA) DPTSP task team, which will review the policy at The National Economic Development and Labour Council (Nedlac).

During his recent State of the Province Address, Gauteng premier Panyaza Lesufi announced plans to expand the Gautrain network, a project anticipated to cost tens of billions of rands. “To uphold Gauteng’s position as the economic hub, we will accelerate infrastructure investment,” he stated, pledging R120 billion over two years to extend the Gautrain network from 80 to 230km. While SABOA supports all public transport modes, it remains concerned about the lack of investment in the bus industry. Gautrain primarily serves more affluent passengers, yet the bus industry – which caters to a broader demographic – faces route, rate, and service reductions due to insufficient funding.

More attention must be given to bus commuters, many of whom are taxpayers. Surely they also deserve improved access to reliable and affordable transport as part of the “better life for all” vision?