Analysts: Gordhan did his best

2013-02-27 19:47 - Sapa
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Johannesburg - Finance Minister Pravin Gordhan did enough in his Budget speech to balance government spending and revenue given the tough economic conditions, analysts said on Wednesday.

"It was clear that the minister understood that it was a budget that had to be delivered in very tough circumstances and that he was not going to let government expenditure spiral out of control," KPMG economist Lulu Krugel said.

"It is commendable that they are trying to manage down the deficit.... There was a big focus on efficiency, quality of spending and clamping down on corruption."

Krugel commended Gordhan for aligning government spending with the National Development Plan.

She said the only worrying issue was the lack of detail on the commission which will review the country's tax regime later this year.

Investec economist Annabel Bishop praised Gordhan for presenting a positive outlook on the country's economy.

"Both Moody's and Standard and Poor's have South Africa on a negative outlook, but we believe today's budget outcome is not likely, in isolation, to prompt any of the rating agencies to downgrade SA's rating," she said.

Conrad Wood, head of fixed income at Momentum Asset Management, said Gordhan was in the difficult situation of having to balance revenue and spending, and at the same time create jobs and economic growth.

Wood said Gordhan had made an effort to dispel fears about the mining sector.

"He definitely made some positive noises, but until investors get certainty on policy from the likes of the president and mineral resources minister, I still think there will be this lingering uncertainty, which unfortunately impacts investment in the mining sector," he said.

In his speech, Gordhan announced that retirement funds would be required to identify appropriate preservation funds for exiting members, who would be encouraged to preserve their savings when changing jobs.

Vedika Andhee, director for tax at Ernst & Young, said the question was whether South Africans could afford to save or retain the money placed in retirement funds.

"In particular, individuals who are retrenched are more likely to withdraw from their pension or provident funds in order to pay their day-to-day living expenses, including debt, as circumstances do not afford them the luxury of moving their money to a preservation fund," Andhee said.

* Visit our Budget Centre for full coverage of the 2013 Budget Speech, including a sin tax and personal tax calculator.

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