Budget 2023
Share

Gordhan slams developed states

Cape Town - In his budget speech to parliament on Wednesday, Finance Minister Pravin Gordhan lashed out at what he called a negative narrative from some developed countries that placed blame for the current global market turmoil on emerging nations.

South Africa's large current account deficit, at 6.8% of gross domestic product, has made the rand vulnerable to market pressure, forcing the Reserve Bank to unexpectedly raise interest rates last month for the first time in nearly six years to curb inflation pressures from the weak currency.

Developing markets generally, which offer higher yields but more risk for investors, have sold off sharply since last year as the United States has started to wind up monetary stimulus that has pumped billions of dollars into the global system.

"These are voices from precisely those places where huge regulatory failures led to the financial earthquake we have experienced," Gordhan said.

"Geo-political gamesmanship is the order of the day. Collaboration in addressing global challenges is deferred and global statesmanship is in retreat," he said.

South Africa trimmed budget deficit forecasts for the next financial year on Wednesday, vowing to keep spending in check even as the country heads for general elections.

But Finance Minister Pravin Gordhan cut the government's economic growth forecast for this year to 2.7 %, saying challenges persisted since a recession five years ago, and that delays to new infrastructure, especially in the power sector, posed risks.

Presenting a R1.3trn budget to parliament two months before elections on May 7, Gordhan forecast a budget gap of 4.0% of GDP for the 2014/15 year, down slightly from 4.1% seen in October.

Despite the imminent polls and voter discontent at 25% unemployment and shoddy public services, he vowed to contain spending - a pledge likely to please ratings agencies - while maintaining support for South Africa's poorest.

Revenue collection should rise as exporters benefited from a weaker rand, Gordhan said. In addition, above-inflation wage increases should result in sustained personal income tax flows, while strong imports would boost customs revenue.

Gordhan said the African National Congress would press on with plans to create 6 million new jobs as growth hopefully returned to levels seen before the global financial crisis.

"We can't say that we bounced back as many others have," Gordhan told a news conference. "But we haven't just become rabbits in the headlights."

In its 2014 budget outline, the Treasury cut its growth forecast for this year from the 3% seen last October. It predicted a modest quickening to 3.5% by 2016.

That is a far cry from average growth of 5% recorded in the five years prior to the recession, and not enough to slash unemployment, one of the government's main challenges ahead of the polls.

Protests from the people

President Jacob Zuma's administration has faced a wave of violent protests over service delivery, while tens of thousands of miners have also gone on strike at the world's top three platinum producers to press for higher wages.

"Government recognizes that service-delivery shortcomings and social marginalisation are widespread and have led to heightened tensions," the Treasury said in the budget statement.

Standard Chartered economist Razia Khan said that while the better-than-expected fiscal projections in the budget had probably diminished the threat of near-term action from credit agencies who have downgraded South Africa's rating, its external vulnerabilities should persist.

"Should markets be gripped by a new bout of global volatility, the emphasis on South Africa's key weaknesses is likely to remain," Khan said.

The rand, which shed about a fifth of its value against the dollar last year, was weaker after the budget, partly tracking a retreat in commodity currencies due to concerns about a slowdown in major consumer China.

Bond yields were little changed, with the yield on the benchmark 2026 issue at 8.5%.
We live in a world where facts and fiction get blurred
Who we choose to trust can have a profound impact on our lives. Join thousands of devoted South Africans who look to News24 to bring them news they can trust every day. As we celebrate 25 years, become a News24 subscriber as we strive to keep you informed, inspired and empowered.
Join News24 today
heading
description
username
Show Comments ()
Rand - Dollar
18.97
-0.2%
Rand - Pound
24.06
+0.2%
Rand - Euro
20.57
+0.1%
Rand - Aus dollar
12.35
+0.6%
Rand - Yen
0.13
+0.8%
Platinum
900.98
-0.2%
Palladium
1,000.76
-0.5%
Gold
2,153.55
-0.3%
Silver
24.91
-0.5%
Brent Crude
86.89
+1.8%
Top 40
65,669
-0.9%
All Share
71,900
-0.7%
Resource 10
52,931
-0.7%
Industrial 25
99,286
-1.2%
Financial 15
16,575
-0.3%
All JSE data delayed by at least 15 minutes Iress logo
Company Snapshot
Editorial feedback and complaints

Contact the public editor with feedback for our journalists, complaints, queries or suggestions about articles on News24.

LEARN MORE
Government tenders

Find public sector tender opportunities in South Africa here.

Government tenders
This portal provides access to information on all tenders made by all public sector organisations in all spheres of government.
Browse tenders