On 15 March 2020, President Cyril Ramaphosa declared the Covid-19 pandemic a national disaster. In the approximately ten weeks since then, we have responded as a nation with remarkable discipline, resolve and focus. Yes, there have been issues for debate and disagreement. It would be artificial to expect otherwise. Worldwide there has been vigorous debate. Our approach has been in line with world best practice and this has been acknowledged as such.

It is critical that we are not distracted from the tasks at hand. The infection peak is yet to come. The economic crisis will deepen. The Provincial Government of KwaZulu-Natal, has been hard at work rolling out the four pillars of our response.

Firstly, we have the health response which includes public health education (personal hygiene, personal protective equipment (PPE) and social distancing). Then there is the medical infrastructure relating to hospital high care and ICU facilities, and isolation and quarantining facilities. Very importantly, there are screening, testing and contact tracing programmes. We have to ensure the procurement of adequate PPE as well as employ additional medical professionals. At this point, we estimate additional KwaZulu-Natal Department of Health expenditure of approximately R6,8 billion.   

Our second pillar relates to support for the vulnerable, both economic and social. The President’s R 500 billion package has been largely about this. Thus, we have had top-ups for our existing and new grants, food parcels, accessing UIF funds, as well as some grants, soft loans and other relief measures for our businesses. We must thank our civil society organisations for their massive contribution towards alleviating the plight of the poorest mainly in the food distribution programme.

The third pillar is that of ensuring compliance with Disaster Regulations. This requires a massive coordinated effort from our emergency and law enforcement agencies who together with our health workers, have become the frontline of our fight against the virus.

Fourthly, and arguably our most complex problem, is to deal with economic recovery on a short, medium, and long term basis. We are very encouraged by the response of our social partners to the call of our President to build a strong social compact between government, business, labour and civil society. Vigorous and vibrant discussions have already taken place. The KwaZulu-Natal Economic Council, which represents all the social partners, is hard at work. We have disaggregated the KwaZulu-Natal economy into 12 sectors, each of which requires tailor-made recovery plans. We are encouraged by the active participation of all sectors in each workstream. These sectors are: Finance, Agriculture, Industrial Development, Health Innovation and Manufacturing, Clothing and Textiles, Creative Industries, Informal Sector, Trade and Investment, Infrastructure Development, Tourism, ICT and Fourth Industrial Revolution (4IR), and the government sector focussing on “Red Tape in Regulatory Framework”.

We are developing responses that are sector specific, seeking to be precise and nuanced in implementation. Our limited resources must be used effectively in a manner targeted at the priorities we identify. For example, there is consensus emerging that a key priority must be the ICT sector. We seek to achieve better coordination and the resolute rollout of broadband infrastructure and exponentially ramp up connectivity in KwaZulu-Natal. The virtual world is a key part of the current and post-Covid-19 world.

All of these programmes are meaningless if not underpinned by appropriate financial allocations. We estimate our direct Covid-19 expenditure in KwaZulu-Natal to be approximately R10 billion, excluding education expenditure which is likely to be a further very significant amount.

All of the above must be achieved against the backdrop of a severely contracting economy, nationally and internationally. The estimate so far is that the South African economy will contract by 6.8%. The South African Revenue Service already anticipates a R285 billion revenue shortfall in this financial year. The net result is that at this point we can expect our Provincial Budget of approximately R138 billion to be reduced significantly. Municipalities will face similar difficulties and will have to respond appropriately.

We acknowledge the meaningful impact of the President’s R500 billion package. However, there is a legitimate view that the package is more relief than stimulus. R130 billion is reprioritised from existing budgets.

We recognise the steps by the Reserve Bank in reducing interest rates by 2.75% since the beginning of the year. Great care must be taken about our already overwhelming debt burden. Almost  230 billion of our national budget is spent on debt service costs annually.

Notwithstanding all these very limiting factors, there is an argument for a bigger and more effective stimulus package. We simply have to strive for significant economic growth. It is only economic growth that can manage and negate the current limitations. Until that issue is resolved, we have to manage with what we have, use it carefully and uncompromisingly resist any tendency towards any abuse of Covid-19 expenditure specifically, and public funds generally.

While we will soon pass the 2020/2021 budget as tabled in February this year, we will shortly thereafter have an Adjustment Budget. The National Adjustment Budget is expected to be tabled by the Minister of Finance on 24 June 2020. Our Provincial Adjustment Budget will follow shortly thereafter.

These are extraordinarily difficult times which require an extraordinary response. On the one hand we will have to meet the demands of our public health response knowing full well that we are still going to face the peak of the wave of infection. On the other hand, we must mitigate the economic loss and prepare the ground for a sustained economic recovery. This requires a very special united and collective effort.

Worldwide, it has been said that the pandemic has exposed the faultlines in society, between rich and poor. In our country this is an exceptionally serious faultline with a toxic overlap between race and inequality. All our measures in response to this crisis must also be underpinned by principles of transformation. We are encouraged that all levels of society seem to understand and accept this imperative. It has to be economic recovery AND economic transformation. We can only achieve this together.

As Provincial Treasury, we have given ourselves the task of being “Guardian of the Public Purse”. We do take this responsibility seriously. We also understand that our overall success will depend on the extent to which we can truly build a capable state.

The work of KwaZulu-Natal Treasury is absolutely critical. We have to deal with significant budget cuts and reprioritisation. We will monitor expenditure very carefully, and swiftly escalate issues that need attention. We will guard against any abuse of Covid-19 funds. Beyond that, we need to contribute to building and entrenching good governance. We do that in the first instance by our own example.

The time has come for a very special civil service that can rise to the occasion with dedication, discipline and sense of national service – a civil service that keeps in the forefront of their minds our citizens generally and now specifically the frontline staff in the face of the pandemic. In all of the above, we will be tested every day on hundreds of items of detail.

It is for good reason that we repeatedly call for a very special united and collective effort.

Let us not falter.

Written by MEC for Finance in the Province of KwaZulu-Natal, Ravi Pillay