The Medium-Term Budget Policy Statement (MTBPS) to be presented in Parliament this week is another opportunity for government to signal real progress in improving the management of the country’s finances, following positive sentiment following the removal of South Africa from the Financial Action Task Force grey list, business leadership organisation Business Leadership South Africa CEO Busi Mavuso writes in her latest newsletter.

“The remarkable story is that, despite our extremely weak economic growth levels, government has managed to keep tight control of both expenditure and revenue. Indeed, many economists are expecting better numbers than were tabled when the Budget was finally passed earlier in the year, after the debate over a potential value added tax (VAT) increase was resolved,” she explains.

Without extra VAT, the National Treasury has relied on increased collections by the South African Revenue Services, and the MTBPS will reveal how well that has gone, Mavuso posits.

She adds that Treasury has also been managing spending through its expenditure reviews, going through government departments and assessing the quality of spending.

“Early indicators are that it has been able to fill the gap left by the lack of new taxes and that it will be able to confirm it is on track to deliver another primary budget surplus this year. That means its non-interest spending will be less than revenue, leaving a modest amount to start chipping away at our huge debt pile,” Mavuso highlights.

She points out that Treasury has been rebuilding the credibility lost during State capture, when the country’s debt levels increased, and expects ratings agencies will begin to see that this is now reliable.

“Investors are already convinced – yields have fallen about 1.5 percentage points since the Budget earlier this year, helped by a global rally in emerging markets,” Mavuso enthuses.

However, she mentions one key spending area as presenting ongoing challenges.

“In the Budget, government promised a R1-trillion spending spree to turn South Africa into a construction site. But the figures suggest that is not happening. Public sector infrastructure investment appears to have fallen to a multi-year low, even while the private sector has been picking up its investment levels,” Mavuso explains.

She attributes the lack of spending to a skills crisis, particularly in local government.

“The Auditor-General earlier this year reported on an assessment of projects intended to deliver critical electricity, housing, road, sanitation and water infrastructure in municipalities.

“She found, on average, that projects were delayed by 21 months, reflecting poor management on the back of a lack of institutional capacity, ineffective planning, weaknesses in procurement and contract management practices and a lack of accountability for poor performance, among much else,” Mavuso outlines.

She calls for a “whole-of-government solution” to remedy the infrastructure and investment challenges.

In this vein, Mavuso welcomes Operation Vulindlela’s new focus on local government delivery in the programme's Phase II, as well as the ongoing work to professionalise the public service.