EDITORIAL | Murphy’s Law strikes as fiscal anchor hurtles at living costs

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Many are familiar with the concept of Murphy’s Law. This is an idea that anything that can possibly go wrong will not only go wrong, but will also do so at the least convenient time possible. Murphy’s Law, meet minister of finance Enoch Godongwana.

When he tabled the MTBPS in Parliament last week, Godongwana made many announcements that piqued the interests of spectators, including temporary fuel price relief and progress on legislative changes to municipal finance transfers and allocations.

But perhaps more consequential than any of these, at least in the long term, was Godongwana’s announcement that, as part of its efforts to safeguard these gains, the government released draft fiscal anchor legislation for public comment in October.

“The legislation is expected to be tabled in Parliament in 2027. The proposed legislation sets out fiscal sustainability as a standard in the Public Finance Management Act, instead of a rigid numerical rule.

“It requires each administration to commit to its own fiscal objectives, consistent with the electoral mandate. It then reports against it at every budget and explains any material deviation to Parliament. The financial and fiscal commission is given new responsibility to independently report on the consistency of the fiscal framework with the administration’s fiscal plan.”

The minister said this approach preserves flexibility in changing economic conditions while strengthening transparency, accountability and fiscal discipline.

“Most importantly, it helps to ensure that developmental priorities and constitutional obligations are pursued at a pace that public finances can sustain. That is how we protect our economic future and our constitutional commitments.”

It is difficult for many to see what the MTBPS says about the fiscal anchor proposal and not see an attempt by the GNU to introduce a hedge in the fiscal planning and budgeting process against a more populist GNU, which may take shape further down the line.

Unfortunately, this adjustment to policy is being introduced at a fraught time of considerable cost pressures around the world as a result of the ongoing US-Iran war and widespread protests against governments cutting various public benefit programmes.

Asked by reporters during a lock-up ahead of the tbling of the MTBPS about what the fiscal anchor would mean in relation to future configurations of the GNU which are likely to table populist budgets, Godongwana said it was important for the government, whoever leads it, to have fiscal guardrails.

“I would be misleading if I said there were issues in Cabinet on the fiscal anchor as a principle, whether we are trying to prescribe to future administrations. In our view, we are not prescribing to future administrations, because each administration will have to produce a fiscal plan.”

Unfortunately, this adjustment to policy is being introduced at a fraught time of considerable cost pressures around the world as a result of the ongoing US-Iran war and widespread protests against governments cutting various public benefit programmes.

Anybody who is anybody knows that France has seen an estimated €1bn in damage to its cities, a thousand people injured and an estimated 2,500 people arrested, according to AP News’ latest reports.

French people are struggling to keep pace with climbing gas prices, which filter through to rising daily expenses and buckling public services, while wages remain under pressure and stagnant. This is a new global reality that South Africa is obviously not exempt from.

Earlier this month, Italy also saw protests against the rising cost of living, stagnant wages, inflation, fuel costs and a severe shortage of affordable housing. Spain and Portugal have also seen widespread protests over housing, while Belgium protested energy costs and Albania protested the rise in the cost of public services.

This is not only happening in the third world. It is happening in countries and societies that are some of the best resourced outside of the Scandinavian region. Even wealthy nations are facing the decision of having to curtail spending on essentials or bankrupting themselves to mollify the masses.

The Institute for Economic Justice warned that the introduction of the proposed ‘principles-based’ fiscal anchor was pitched in the minister’s speech as a return to fiscal policy driven by “developmental priorities and constitutional obligations”.

As Godongwana and his MTBPS stand, South Africa intends to maintain its primary budget surplus, continuing the narrowing of deficits and steadying the debt-to-GDP ratio after it peaks at 78.4% before it starts declining.

But the fight to balance the books while businesses and households struggle to do the same will be a long and arduous fight, especially with parties such as the EFF and MK Party waiting in the wings to promise the world to financially bruised South Africans come 2029.

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