WEBVTT 00:00:04.859 --> 00:00:08.939 Hello and welcome to the So What podcast in which 00:00:08.939 --> 00:00:11.960 political economic analyst JP Landman discusses 00:00:11.960 --> 00:00:14.580 the issues uppermost in the minds of South Africans. 00:00:15.439 --> 00:00:17.600 You can find a written version of this content 00:00:17.600 --> 00:00:22.280 on JP's website JPLundman .co.za. I am Ruda 00:00:22.280 --> 00:00:28.789 Landman and I am your host. Hello and a very 00:00:28.789 --> 00:00:32.829 warm welcome to a newsletter dated the 12th of 00:00:32.829 --> 00:00:38.049 May 2025 with the title Budget 3 .0, A Moment 00:00:38.049 --> 00:00:43.770 of Decision. Two weeks ago on Freedom Day, the 00:00:43.770 --> 00:00:47.570 Cape High Court prohibited the Minister of Finance 00:00:47.570 --> 00:00:50.630 from proceeding with the VAT hike. Heavens, it 00:00:50.630 --> 00:00:54.399 feels like ages and ages ago. But even before 00:00:54.399 --> 00:00:57.320 that, the minister himself withdrew his proposal 00:00:57.320 --> 00:01:00.039 for that vatike. Why did he do that? Because 00:01:00.039 --> 00:01:02.140 he lost political support. If you go back to 00:01:02.140 --> 00:01:05.939 our previous note on the budget, there are four 00:01:05.939 --> 00:01:08.400 decisions to be taken in the budget. The first 00:01:08.400 --> 00:01:10.560 decision is the approval of the fiscal framework. 00:01:11.099 --> 00:01:14.459 That was approved on the 2nd of April, almost 00:01:14.459 --> 00:01:17.439 six weeks ago. But there already one could see 00:01:17.439 --> 00:01:19.700 it was, as we called it in that note, a very 00:01:19.700 --> 00:01:23.540 close -run thing. The fiscal framework was approved 00:01:23.540 --> 00:01:27.180 by a majority of 12 members of parliament, but 00:01:27.180 --> 00:01:29.480 there were 24 members of parliament not present 00:01:29.480 --> 00:01:32.579 in the assembly when the vote was taken. So it 00:01:32.579 --> 00:01:35.920 was a marginal thing anyway. And we raised in 00:01:35.920 --> 00:01:39.099 that note the prospect that the other three decisions 00:01:39.099 --> 00:01:44.700 that awaits the budget may not be approved. And 00:01:44.700 --> 00:01:47.079 what has happened is simply that some parties, 00:01:47.439 --> 00:01:49.519 particularly actions of South Africa, action 00:01:49.519 --> 00:01:52.500 essay, has walked back from their support for 00:01:52.500 --> 00:01:54.500 the fiscal framework. And I think the minister 00:01:54.500 --> 00:01:57.280 realized he didn't have the votes and he runs 00:01:57.280 --> 00:02:00.859 a very real risk of losing the vote in the subsequent 00:02:00.859 --> 00:02:04.239 three approvals that awaits the budget. And then 00:02:04.239 --> 00:02:06.959 the court decision came on top of that, so it 00:02:06.959 --> 00:02:12.900 was back to zero base. But all these complications 00:02:12.900 --> 00:02:16.500 basically also arose because the legal situation 00:02:16.500 --> 00:02:19.629 in South Africa has changed. Pretty much so, 00:02:19.930 --> 00:02:24.150 in South Africa, before and after 1994, followed 00:02:24.150 --> 00:02:27.370 the Westminster model of budget approval. And 00:02:27.370 --> 00:02:29.870 the Westminster model was simply that Parliament 00:02:29.870 --> 00:02:32.110 converted the budget up or they converted it 00:02:32.110 --> 00:02:35.090 down, but they cannot change it. The detail is 00:02:35.090 --> 00:02:37.729 frozen. You can say yes or you can say no, but 00:02:37.729 --> 00:02:41.830 you can't change it. We've had that system in 00:02:41.830 --> 00:02:44.680 our budget approval for many, many years. The 00:02:44.680 --> 00:02:49.280 1996 constitution had a clause section 77 which 00:02:49.280 --> 00:02:51.759 made it clear that legislation must be passed 00:02:51.759 --> 00:02:54.780 by parliament to give that authority to parliament 00:02:54.780 --> 00:02:58.060 not just to approve or reject but also to change. 00:02:58.960 --> 00:03:02.159 For many many years before and after we became 00:03:02.159 --> 00:03:05.740 a democracy our lower -round budget approvals 00:03:05.740 --> 00:03:08.090 were fairly straightforward. Parliament could 00:03:08.090 --> 00:03:10.729 approve a budget, they could vote it up, or they 00:03:10.729 --> 00:03:13.349 could reject a budget voted down, but they could 00:03:13.349 --> 00:03:16.030 not change the budget. The detail of the budget 00:03:16.030 --> 00:03:18.710 was frozen. That was the arrangement before and 00:03:18.710 --> 00:03:22.870 after 1994. Then the final constitution in 1996 00:03:22.870 --> 00:03:27.310 contained a clause in section 77 that Parliament 00:03:27.310 --> 00:03:29.849 must make legislation, must approve legislation 00:03:29.849 --> 00:03:33.669 to give itself the power to change budgets, not 00:03:33.669 --> 00:03:36.419 just to approve or reject them. That was done 00:03:36.419 --> 00:03:42.780 in 2009, some 13 years after the final constitution 00:03:42.780 --> 00:03:45.460 was approved. Now for the first couple of years 00:03:45.460 --> 00:03:48.520 after that change or amendment it didn't really 00:03:48.520 --> 00:03:50.580 matter because the ANC was still the majority 00:03:50.580 --> 00:03:53.120 party and the Minister of Finance was always 00:03:53.120 --> 00:03:56.580 ANC so if he proposes a budget then the party 00:03:56.580 --> 00:03:59.800 votes it through and off it went. After last 00:03:59.800 --> 00:04:01.680 year's election of course those numbers have 00:04:01.680 --> 00:04:06.159 changed. The ANC is no longer in control on its 00:04:06.159 --> 00:04:08.460 own, it needs to form coalitions with other people 00:04:08.460 --> 00:04:11.879 and now you need the support of opposition parties 00:04:11.879 --> 00:04:13.979 to get to get the budget through parliament. 00:04:14.780 --> 00:04:17.000 So it's interesting to do that just to look back 00:04:17.000 --> 00:04:19.879 a little bit at 1993, the year just before we 00:04:19.879 --> 00:04:22.779 became a democracy, Derek Keyes was Minister 00:04:22.779 --> 00:04:27.620 of Finance and he in one budget, in one move, 00:04:27.959 --> 00:04:30.839 he took the VAT rate from 10%, which is what 00:04:30.839 --> 00:04:34.079 it was, to 14%. It's an absolutely incredible 00:04:34.079 --> 00:04:38.350 move. It was really a political achievement. 00:04:38.589 --> 00:04:42.350 And so how did he do it? Well, he did it by consulting 00:04:42.350 --> 00:04:44.850 with everybody inside and outside parliament. 00:04:45.269 --> 00:04:48.029 Parliamentary parties, people outside like the 00:04:48.029 --> 00:04:51.290 ANC at that stage, Kusato, Communist Party and 00:04:51.290 --> 00:04:54.129 so on, about what the budget numbers are. He 00:04:54.129 --> 00:04:55.850 shared it with them and he said, look, this is 00:04:55.850 --> 00:04:57.529 the picture. What do you think we should do? 00:04:58.350 --> 00:05:01.629 And in the end, nobody opposed. People may not 00:05:01.629 --> 00:05:04.939 have supported But nobody opposed the movement, 00:05:05.660 --> 00:05:09.279 the move of that from 10 % to 14%. At that point, 00:05:09.759 --> 00:05:13.199 there also wasn't a majority party who could 00:05:13.199 --> 00:05:16.500 just push it through. In a sense, yes. I mean, 00:05:16.540 --> 00:05:18.519 you had a majority party in Parliament, but Parliament 00:05:18.519 --> 00:05:22.060 was de facto already no longer the only people 00:05:22.060 --> 00:05:24.720 governing the country. And Keyes had the insight 00:05:24.720 --> 00:05:27.160 to see that and to bring the extra parliamentary 00:05:27.160 --> 00:05:30.379 people along. Now, what happened now in 2025 00:05:30.379 --> 00:05:35.240 is that the Minister of Finance, he missed this 00:05:35.240 --> 00:05:38.240 very simple process trick. Just involve people, 00:05:38.839 --> 00:05:41.040 give them all the facts, let them understand 00:05:41.040 --> 00:05:43.139 what the situation is and then let them decide 00:05:43.139 --> 00:05:46.000 what they want to do. He missed that simple process 00:05:46.000 --> 00:05:48.740 trick and he paid a political price for it. Where 00:05:48.740 --> 00:05:52.120 do we stand now? Well, where we stand now is 00:05:52.120 --> 00:05:54.550 that The minister must table a new budget, which 00:05:54.550 --> 00:05:58.129 he will do on 21 May, more or less 10 days from 00:05:58.129 --> 00:06:02.470 now. And the numbers are quite frightening. First 00:06:02.470 --> 00:06:06.509 of all, with NOVAD increasing the budget, the 00:06:06.509 --> 00:06:09.670 deficit on the income side will be over a three 00:06:09.670 --> 00:06:13.600 -year period, 75 billion round. It will be 13 00:06:13.600 --> 00:06:16.579 .5 billion rand for this year. But remember next 00:06:16.579 --> 00:06:18.420 year that was supposed to grow up another half 00:06:18.420 --> 00:06:20.759 a percent. And then over the three year period, 00:06:21.000 --> 00:06:23.459 which is the period of our budgets, that would 00:06:23.459 --> 00:06:25.800 have gone up to 75 billion. So that's number 00:06:25.800 --> 00:06:28.939 one. You're now 75 billion down on the income 00:06:28.939 --> 00:06:32.500 side. Then secondly, when the budget was repaired 00:06:32.500 --> 00:06:36.420 and submitted in February, it assumed a growth 00:06:36.420 --> 00:06:39.800 rate for the economy of 1 .9%. Since then we've 00:06:39.800 --> 00:06:41.779 had the Trump tariffs and all the shenanigans 00:06:41.779 --> 00:06:46.000 around that. And global growth has been forecast 00:06:46.000 --> 00:06:48.540 to be lower. Also South Africa's growth, more 00:06:48.540 --> 00:06:50.899 or less by half a percent. The budget is made 00:06:50.899 --> 00:06:53.920 at 1 .9. We can now work with a budget of say 00:06:53.920 --> 00:06:57.300 1 .4, half a percent lower. If you have half 00:06:57.300 --> 00:06:59.379 a percent less economic growth, obviously you 00:06:59.379 --> 00:07:02.379 will have less tax income. And then the third 00:07:02.379 --> 00:07:04.680 thing that has happened is that Trump has cut 00:07:04.680 --> 00:07:08.920 all the direct transfers or grants that he has 00:07:08.920 --> 00:07:11.720 given to South Africa for AIDS treatment, for 00:07:11.720 --> 00:07:14.100 health research and so on. All that has been 00:07:14.100 --> 00:07:17.100 cut and that amount adds up to just under 10 00:07:17.100 --> 00:07:20.139 billion, about 9 .5 billion. So if you take those 00:07:20.139 --> 00:07:23.259 three numbers you lose that, you lose economic 00:07:23.259 --> 00:07:26.139 growth and you've lost the cash grant that came 00:07:26.139 --> 00:07:29.699 into the country every year. You're looking at 00:07:29.699 --> 00:07:32.519 billions and billions of a shortfall. It's really 00:07:32.519 --> 00:07:34.660 a huge amount of money that has now been covered. 00:07:35.529 --> 00:07:39.569 You say we are faced with a fundamental question. 00:07:40.069 --> 00:07:42.790 What do you mean? The fundamental question is 00:07:42.790 --> 00:07:45.449 now, given this huge shortfall in both income 00:07:45.449 --> 00:07:49.569 and extra expenditure, what will our parliamentarians 00:07:49.569 --> 00:07:52.310 who now have the ability to change the numbers 00:07:52.310 --> 00:07:55.329 in the budget, what will they do? Will they be 00:07:55.329 --> 00:07:59.029 willing to cut back expenditure or will they 00:07:59.029 --> 00:08:03.170 simply ignore the fact that there's a huge deficit? 00:08:03.759 --> 00:08:06.819 and simply borrow more money. That is really 00:08:06.819 --> 00:08:09.399 the essence. We know there will be an income 00:08:09.399 --> 00:08:12.019 shortfall. We know that expenditure is much more 00:08:12.019 --> 00:08:14.980 than income. So where do you go now? Now the 00:08:14.980 --> 00:08:18.160 important point here is in the last three years 00:08:18.160 --> 00:08:20.839 under the under minister Gordon Gwana, there's 00:08:20.839 --> 00:08:23.439 been a concerted effort to stabilize debt. How 00:08:23.439 --> 00:08:26.620 do you stabilize debt? You run a primary surplus. 00:08:27.160 --> 00:08:29.980 A primary surplus is simply your income is more 00:08:29.980 --> 00:08:32.559 than your expenditure before you pay interest. 00:08:33.320 --> 00:08:35.100 Once you've made interest, of course, you're 00:08:35.100 --> 00:08:36.860 still down. There's a deficit. You must borrow 00:08:36.860 --> 00:08:39.639 money. But at least it is the beginning of a 00:08:39.639 --> 00:08:42.879 process of working down your debt. Now, for this 00:08:42.879 --> 00:08:45.080 year, in the first budget, he had a number of 00:08:45.080 --> 00:08:49.460 $71 billion round as a primary surplus. That's 00:08:49.460 --> 00:08:51.779 a big number. That's a big number. If you can 00:08:51.779 --> 00:08:54.600 run with $70 billion a year for a couple of years' 00:08:54.740 --> 00:08:57.220 primary surplus, you will stabilize your debt 00:08:57.220 --> 00:08:59.710 and you will start working that down. So the 00:08:59.710 --> 00:09:02.549 critical issue now, the critical decision that 00:09:02.549 --> 00:09:05.169 parliament must take, is will they stick with 00:09:05.169 --> 00:09:08.409 a primary surplus of roughly $71 billion? It 00:09:08.409 --> 00:09:10.330 can be a bit lower, it's not a strange motion. 00:09:10.830 --> 00:09:13.450 Or will they simply ignore that run with the 00:09:13.450 --> 00:09:17.610 expenditure which is there and run up more debt? 00:09:17.870 --> 00:09:19.809 That is the question that's now facing parliament. 00:09:21.210 --> 00:09:25.250 Why shouldn't we just borrow more? All those 00:09:25.250 --> 00:09:29.250 expenditure items are incredibly important. No, 00:09:29.309 --> 00:09:31.750 absolutely. Whether it's education or health 00:09:31.750 --> 00:09:34.570 or AIDS or capital expenditure on infrastructure, 00:09:34.870 --> 00:09:37.070 indeed. And that is the point about the budget. 00:09:37.250 --> 00:09:39.950 There are a huge number of very important items 00:09:39.950 --> 00:09:42.610 that nobody wants to cut. But you don't have 00:09:42.610 --> 00:09:45.529 enough money. We don't have a money tree. We're 00:09:45.529 --> 00:09:48.450 still looking to plant that. So you've got to 00:09:48.450 --> 00:09:55.320 cut your cloak according to your cloth. And so 00:09:55.320 --> 00:09:58.100 the cost of borrowing is what is important. Now, 00:09:58.519 --> 00:10:00.179 let's just look at the numbers that the minister 00:10:00.179 --> 00:10:02.960 had in his Swiss budget, which are the numbers 00:10:02.960 --> 00:10:06.279 that we now have before his new budget. He was 00:10:06.279 --> 00:10:11.600 penciling into borrow 394 .6 billion rand. It's 00:10:11.600 --> 00:10:14.440 an enormous amount of money. That was after the 00:10:14.440 --> 00:10:16.519 VAT increase. That was after the VAT increase. 00:10:17.080 --> 00:10:19.080 Now he's lost the VAT increase, so that number 00:10:19.080 --> 00:10:21.519 will obviously go up. The difference that it 00:10:21.519 --> 00:10:28.200 makes Runa is for every 0 .01 % or as it is called 00:10:28.200 --> 00:10:31.159 in the jargon one basis point. A percentage consists 00:10:31.159 --> 00:10:36.220 of 100 basis points. Every one basis point increase 00:10:36.220 --> 00:10:40.879 in the interest rate increases the actual interest 00:10:40.879 --> 00:10:47.139 payment by an enormous amount. This 394 billion 00:10:47.139 --> 00:10:49.500 that the minister wants to borrow it means he 00:10:49.500 --> 00:10:53.700 will pay with 0 .01 % extra, you will pay an 00:10:53.700 --> 00:10:57.159 extra 39 million rand a year in interest or to 00:10:57.159 --> 00:11:00.360 put it more graphically, more than 100 ,000 rand 00:11:00.360 --> 00:11:03.179 per day for every day of the week. So you're 00:11:03.179 --> 00:11:05.220 talking big money here. You can employ a lot 00:11:05.220 --> 00:11:08.820 of teachers and doctors for 100 ,000 rand a day. 00:11:09.399 --> 00:11:12.379 Absolutely. So that's why it matters. You cannot 00:11:12.379 --> 00:11:14.980 just borrow more because the more you borrow, 00:11:15.080 --> 00:11:17.100 the more interest you have to pay and you lose 00:11:17.100 --> 00:11:22.159 control of your situation. So what we've seen 00:11:22.159 --> 00:11:24.360 when the budget was not approved and we had the 00:11:24.360 --> 00:11:28.059 whole budget kerfuffle in February is that that 00:11:28.059 --> 00:11:30.700 has already led to an increase in the interest 00:11:30.700 --> 00:11:34.600 payable. And that increase will cost us more. 00:11:35.840 --> 00:11:40.320 That is just the reality. Why is the bond market 00:11:40.320 --> 00:11:42.679 part of what you're writing about? Where does 00:11:42.679 --> 00:11:44.799 that fit in? The bond market is the place where 00:11:44.799 --> 00:11:47.970 politics and economics meet. That's the place 00:11:47.970 --> 00:11:50.509 where those two forces come together and they 00:11:50.509 --> 00:11:52.690 result in a particular thing and that particular 00:11:52.690 --> 00:11:55.230 thing is the interest rate. So the bond market 00:11:55.230 --> 00:11:57.429 or the capital market is simply a market where 00:11:57.429 --> 00:12:00.029 people with money come, pension fund, insurance 00:12:00.029 --> 00:12:03.750 companies and so on, banks. They come there and 00:12:03.750 --> 00:12:06.009 they offer money to the government which government 00:12:06.009 --> 00:12:08.789 wants to borrow. Capital market is where governments 00:12:08.789 --> 00:12:12.909 go worldwide to finance their deficits. It's 00:12:12.909 --> 00:12:15.809 a standard institution worldwide. So you've got 00:12:15.809 --> 00:12:17.549 people of money and you've got a government who 00:12:17.549 --> 00:12:19.950 wants to borrow money. They come together. There's 00:12:19.950 --> 00:12:22.370 an auction where people bid. This happens in 00:12:22.370 --> 00:12:25.509 South Africa every Tuesday. And an interest rate 00:12:25.509 --> 00:12:29.149 is set at which the government then can borrow 00:12:29.149 --> 00:12:32.470 money from the investors. Now that rate is called 00:12:32.470 --> 00:12:35.549 the long rate. Why the long rate? Because normally 00:12:35.549 --> 00:12:38.570 the duration is for 10 years. It can also be 00:12:38.570 --> 00:12:40.629 a little bit shorter, five years, seven years. 00:12:41.129 --> 00:12:43.669 It can also be 20 years or 30 years. But the 00:12:43.669 --> 00:12:46.149 average standard that we use worldwide is the 00:12:46.149 --> 00:12:50.169 10 -year yield, which is the product of that 00:12:50.169 --> 00:12:53.090 auction that takes place at the bond market. 00:12:53.690 --> 00:12:56.649 So the bond market is really a very substantial 00:12:56.649 --> 00:13:00.389 institution and an important institution. Without 00:13:00.389 --> 00:13:03.149 that, the government will struggle to finance 00:13:03.149 --> 00:13:06.889 itself and to finance particularly its deficit. 00:13:07.409 --> 00:13:09.450 But it's also the place, as I say, where politics 00:13:09.450 --> 00:13:12.179 and economics meet. political decisions impact 00:13:12.179 --> 00:13:15.059 on a bond market. When, for example, we had the 00:13:15.059 --> 00:13:17.779 Karfuful around the budget, the long raid went 00:13:17.779 --> 00:13:20.240 up, because people were saying there's more risk 00:13:20.240 --> 00:13:22.639 now. And because there's more risk and we don't 00:13:22.639 --> 00:13:25.480 know whether we will be repaid, therefore we 00:13:25.480 --> 00:13:28.740 have to charge more for our money. So politics 00:13:28.740 --> 00:13:31.240 affect the bond market. There's no question about 00:13:31.240 --> 00:13:34.179 that. And if you want to keep the long raid down, 00:13:34.399 --> 00:13:37.350 you want to keep your long... interest rates 00:13:37.350 --> 00:13:40.649 as low as possible. You need sensible politics, 00:13:40.850 --> 00:13:44.549 but you also need sensible fiscal policies. We 00:13:44.549 --> 00:13:48.269 actually saw this play out when the GNU was formed. 00:13:48.690 --> 00:13:51.350 Absolutely. Since the formation of the GNU about 00:13:51.350 --> 00:13:54.169 11 months ago, the long rate has dropped by as 00:13:54.169 --> 00:13:57.570 much as 80 basis points. It reduces the amount 00:13:57.570 --> 00:13:59.610 of interest that we have to pay substantially. 00:14:00.529 --> 00:14:02.289 Since we've had the budget car full full, that 00:14:02.289 --> 00:14:04.929 being reversed again and so on, Trump's tariffs 00:14:04.929 --> 00:14:08.120 influenced that Many things play a role. The 00:14:08.120 --> 00:14:10.200 big thing is to try and keep that number as low 00:14:10.200 --> 00:14:12.740 as possible. And it's not just really because 00:14:12.740 --> 00:14:15.340 it's about what the government pays in interest. 00:14:16.179 --> 00:14:18.860 It also sets the cost of capital in the economy. 00:14:19.460 --> 00:14:22.360 Everybody looks at the 10 -year yield. Companies 00:14:22.360 --> 00:14:25.139 who want to expand, who want to invest, who want 00:14:25.139 --> 00:14:28.919 to buy machinery. they look at the long yield 00:14:28.919 --> 00:14:31.379 and they calculate the cost of capital from that. 00:14:31.919 --> 00:14:34.240 So if that number goes up, your cost of capital 00:14:34.240 --> 00:14:37.179 rises, investment becomes more difficult. That 00:14:37.179 --> 00:14:39.519 number goes down, cost of capital goes down, 00:14:40.259 --> 00:14:43.480 investment becomes easier. So it's a really important 00:14:43.480 --> 00:14:46.279 number to manage in the national economy. In 00:14:46.279 --> 00:14:48.820 fact, I want to go so far as to say that that 00:14:48.820 --> 00:14:52.679 number, the long rate, is more important than 00:14:52.679 --> 00:14:55.179 what the vet rate is. It's more important than 00:14:55.179 --> 00:15:00.019 the vet rate. We saw the impact in America recently. 00:15:00.259 --> 00:15:03.940 Even President Trump is not... What's the word? 00:15:04.179 --> 00:15:07.360 Immune. Absolutely. We saw two big U -turns by 00:15:07.360 --> 00:15:10.720 Trump. The first one was when he announced these 00:15:10.720 --> 00:15:13.139 tariffs on Liberation Day, the 2nd of April. 00:15:13.919 --> 00:15:15.879 There was a violent reaction from the financial 00:15:15.879 --> 00:15:18.580 markets, including the bond market, three, four 00:15:18.580 --> 00:15:21.299 days later he capitulated. And he said, OK, he's 00:15:21.299 --> 00:15:24.350 suspending them for 90 days. Now we will have 00:15:24.350 --> 00:15:26.289 to see whether those tariffs come back after 00:15:26.289 --> 00:15:29.230 90 days. There's increasingly a view that they 00:15:29.230 --> 00:15:31.250 won't. But that's not the point, the point is 00:15:31.250 --> 00:15:34.129 he made a U -turn. His other U -turn was when 00:15:34.129 --> 00:15:36.669 he after he threatened to fire Jerome Powell, 00:15:37.309 --> 00:15:39.450 the chairman of the American Central Bank, Federal 00:15:39.450 --> 00:15:43.169 Reserve. Once again, a huge reaction from the 00:15:43.169 --> 00:15:46.470 bond market, Trump retreated. So much so that 00:15:46.470 --> 00:15:50.649 the Financial Times talk about Tarco, Trump again 00:15:50.649 --> 00:15:54.740 chickens out. Now he chickens out before the 00:15:54.740 --> 00:15:57.539 power of the bond marker. We've also seen it 00:15:57.539 --> 00:16:01.740 in the UK where less trust in 2022 became the 00:16:01.740 --> 00:16:03.919 shortest -serving Prime Minister in British history, 00:16:04.220 --> 00:16:07.799 50 days. Why? She submitted a budget to parliament 00:16:07.799 --> 00:16:11.100 which was not funded at all, with no possibility 00:16:11.100 --> 00:16:13.600 of funding it. And the bond marker just said 00:16:13.600 --> 00:16:17.299 no, and she was out. We also saw it earlier here 00:16:17.299 --> 00:16:19.879 in South Africa when Des van Ruin was our Minister 00:16:19.879 --> 00:16:23.059 of Finance for four days. Why was he out after 00:16:23.059 --> 00:16:25.779 four days? Because of a violent reaction from 00:16:25.779 --> 00:16:28.159 the bond market. So the bond market is where 00:16:28.159 --> 00:16:31.059 politics and economics meet. It determines the 00:16:31.059 --> 00:16:33.620 long -rate and you cannot escape from that discipline. 00:16:34.559 --> 00:16:38.519 In summary, so what? I think the so what is first 00:16:38.519 --> 00:16:41.279 of all for the first time in our South Africa's 00:16:41.279 --> 00:16:44.320 history, not just our democratic history, but 00:16:44.320 --> 00:16:47.700 also before 1994, parliament now has the right 00:16:47.700 --> 00:16:51.159 to change a budget, not just approve it or reject 00:16:51.159 --> 00:16:54.100 it, not just vote it up or vote it down, but 00:16:54.100 --> 00:16:56.379 actually change the numbers inside the budget. 00:16:56.860 --> 00:17:00.240 They now have that ability. With that power of 00:17:00.240 --> 00:17:02.840 course comes a huge responsibility. Parliament 00:17:02.840 --> 00:17:06.019 now has the responsibility to exercise there 00:17:06.019 --> 00:17:10.380 we can change at discretion or we can change 00:17:10.380 --> 00:17:15.579 at power in a way which doesn't undermine the 00:17:15.579 --> 00:17:18.099 broader economy in a way which is reconcilable 00:17:18.099 --> 00:17:20.740 with what the constraints of the bond market. 00:17:21.700 --> 00:17:23.900 Our biggest challenge at the moment is a challenge 00:17:23.900 --> 00:17:26.000 that Gordon Gwana has been working on for three 00:17:26.000 --> 00:17:28.500 years now and that is to stabilize our debt. 00:17:28.970 --> 00:17:31.849 That you can only do if you run a primary surplus 00:17:31.849 --> 00:17:35.670 and the decision now before Parliament is not 00:17:35.670 --> 00:17:39.250 to take that surplus which is there and just 00:17:39.250 --> 00:17:41.190 throw it to the wind and run a bigger deficit 00:17:41.190 --> 00:17:43.809 because then we won't make it in the long run. 00:17:44.650 --> 00:17:47.970 So politics and economics meet in the bond market. 00:17:48.450 --> 00:17:51.109 Yes, the will of the people are important. We've 00:17:51.109 --> 00:17:53.069 seen the will of the people expressed around 00:17:53.069 --> 00:17:57.180 that debate. It's also now important to look 00:17:57.180 --> 00:17:59.680 at long -term fiscal stability and we've got 00:17:59.680 --> 00:18:02.259 to balance the will of the people with long -term 00:18:02.259 --> 00:18:04.859 fiscal stability. That is the challenge which 00:18:04.859 --> 00:18:09.299 is now before Parliament, before 21 May. Thank 00:18:09.299 --> 00:18:12.059 you very much. We will be watching that with 00:18:12.059 --> 00:18:14.579 great interest. Get the popcorn ready for 21 00:18:14.579 --> 00:18:21.049 May. Thank you for listening to the SoWhat podcast. 00:18:21.609 --> 00:18:24.230 If you enjoy this content, please don't forget 00:18:24.230 --> 00:18:27.130 to leave a review and a rating, and please consider 00:18:27.130 --> 00:18:30.130 subscribing so you don't miss any future episodes. 00:18:30.609 --> 00:18:33.609 Also, tell your friends. 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