The Minister of Finance, Mr Enoch Godongwana, aka CFO of SA Inc. has a precarious balancing act in his forthcoming budget speech set for 21 February 2024.
South Africa’s budget is no different to any Company. Income, expenditure, cash flow, capital expenditure, loans, debt are common to both, and it is the balancing thereof to ensure adequacy of income, cash flow and return to shareholders are achieved. And I guess where shareholders are dissatisfied a change to directors takes place so similarly in a country, changes to policy makers are influenced.
So, using the above analogy, it would be, based on the current economic climate that our SA Inc. CFO has somewhat of a task ahead of him in trying to balance income with expenditure and where (likely) a shortfall exists to source funds to meet this.
SA Inc. has one source of income – tax and one customer, the taxpayer. Business would view this as a serious risk to sustainability! From all reports there just is not enough income being generated from this customer, the taxpayer, to pay the bills let alone fund the capital expenditure programmes that are in dire need of implementation.
From an expenditure point of view, as with most organisation’s costs escalate annually and only really reduce when a radical change is implemented such as a rationalisation including for example offshoring, leveraging technology and using techniques such as “zero based budgeting” combined with accountability.
What then are the options to the SA Inc. CFO? Increase revenue or cut expenditure (or both).
To the first question – how does SA Inc. CFO increase revenue? Expand the tax base – easier said than done and nevertheless long term in nature! Introduce new taxes – not likely in an election year! Attract foreign currency – not easy with existing service delivery challenges. Compounding the above is the high inflationary environment resulting in many customers cutting back on luxury and essentials!
To the second question – how does SA Inc. CFO cut expenditure. As referred to above not that easy given circumstances nevertheless the opportunities do exist (similarly with corporate and other SA entities) including spend allocation, negotiating to get “best bang for every buck” eliminate wasteful expenditure are but some.
My late Gran used to talk of “penny wise and pound foolish” together with “save your pennies and the pounds will look after themselves”. It would appear to me these still make a lot of sense
So, what is the answer? Going back to the beginning grow revenue or cut costs – this applies equally to SA Inc. corporates, SMME’s and households. There are many options and it calls for energy, entrepreneurialism, enthusiasm and intent combined with innovative ideas to identify these opportunities and then some “doers” to implement.