Budget 2023
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Budget 'a rallying cry to curb wasteful spend'

Cape Town - Finance Minister Pravin Gordhan's budget was an internal rallying cry to the ANC rather than a budget tailored to an election year, according to Nomura emerging markets economist Peter Montalto.

"We see it as more of a rallying cry by Finance Minister Pravin Gordhan from the conservative centre-left of the ANC for government to get its act together, to waste less and spend money more efficiently," said Montalto.

"In that sense, it was as much addressed to colleagues in cabinet and economic thinkers in the ANC as it was to the South African electorate and markets or rating agencies."  In line with this, the budget renewed its focus on corruption, improving state capacity, the national development plan (NDP) and talk of partnership and support of the private sector by government.

The last phrase, said Montalto, certainly does not find favour with other parts of government and the ANC, not to mention the tripartite alliance.

"The National Treasury (NT) continues to push ahead on this front but it is an uphill struggle given a lack of central clarity on economic policy basics or wide spread acceptance of NDP as a cohesive whole.

"Who will follow that cry after the election is therefore debatable – indeed, who will be in charge of NT after election is a topic of much speculation in itself."

Montalto sees a Treasury in full command of public sector purse strings, but which still has its work cut out to make other government departments control their spend.

"However, with no major economic policy announcements, the ability of the NT to control the wider economic policy direction remains more limited and contested with other parts of government," said Montalto.

The budget may be tight and does provide a foundation for conservative fiscal policy to continue after the May polls, but Montalto feels that overall, it does little to reassure because it still contains large holes.

He identifies some of these as the national health insurance and its funding, public sector wages, the outcome of the Davis tax review and post electoral spending needs resulting from a loss of voter share.

"Hence, this for us was less of an ‘election budget’ and more an internal rallying cry. There was no particularly new policy to appeal to the electorate, only a splash of new money here and there for jobs and education."

Montalto said the R9.3bn of so-called tax relief for taxpayers was nothing but a historically ‘normal’ inflation offset, though the budget did offer "welcome changes for SMEs and other fund investment and savings incentives, but again nothing very electoro-political".

Said Montalto: "As expected then, hemmed in by politics on one side and rating agencies, markets and NT’s own framework on the other, the budget was very much steady as she goes but with the soaring rhetoric and its political placement as the key degree of freedom that was exploited to the maximum."



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