Budget 2023
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#Budget2017: Disappointing and even a bit depressing

Cape Town - It wasn't entirely Finance Minister Pravin Gordhan’s fault, but Wednesday's National Budget was disappointing, and even a bit depressing.

A relaxed and cheerful Gordhan actually did his best during his Budget Speech in the National Assembly to stir up some enthusiasm among MPs.

It is common knowledge that without decent growth, immense pressure existed to make the fiscal numbers add up. The revenue sources and options to meet the country's ever-growing spending needs and obligations are dwindling.

On top of that Gordhan himself is under political pressure, with factions in the ANC and Cabinet not seeing eye to eye with regard to fiscal stance and economic approach.

To find a way out of their predicament Gordhan and National Treasury found R28bn in additional tax, more or less stayed with previous trends of containing spending and for the rest preached about the play-off between growth and economic transformation, redistribution or closing the inequality gap.

Understandably, it was all about balance and taking the safer middle road. And one can’t blame Gordhan for appeasing his critics just a little bit and showing that he is still a loyal cadre of the ANC by following on President Jacob Zuma's theme of radical economic transformation in his State of the Nation speech.

Gordhan even asked journalists not to use “degrading” terms like "fire" when asking questions about his future. All a bit sad, despite Gordhan’s jokes and cheerfulness.

To Gordhan’s credit, he did emphasise the importance of economic growth and that "a budget can only do and achieve so much". Almost like a schoolmaster he advocated reasonableness, balance and to wisely follow the narrow and prudent road. But words don’t always count for much.

The budget should have been all about growth, with practical steps to prove intent. The further R28bn taken in taxes from the economy should have been aimed at taxing consumption. Instead, it mostly targeted individuals' pockets without being sensitive enough to savings and investment, the cornerstone of economic growth.

The political and social reasons not to raise VAT do not hold water any more. It is obviously the most effective way to raise revenue. And surely the raising of the fuel levy by 30 cents per litre, together with equally heavy increases the past couple of years, will also affect the prices of goods poor people buy by means of rising transport costs - maybe even more than a hike of a half or one percentage point in the VAT rate. An economist could do some calculations on this.

Furthermore, Gordhan could have put more emphasis on spending cuts and the elimination of wasteful government spending, not to even mention public enterprises. Contingency liabilities and guarantees already total hundreds of billions of rand.

Radical elimination of waste and inefficiency as well as radical improvement in the savings and investment culture might help to bring about radical economic growth, without which radical economic change will not be possible.

Practical and realistic plans to achieve the above are necessary.

And at the “crossroads” South Africa is once again at, it is not helpful to always fall back on the condition that growth should be inclusive, and to lament that inclusive growth is worldwide a problem. Be that as it may, it still does not mean that inclusivity, eradication of inequality and other political goals should come before the effort to progress economically.

Sometimes the price is just too high.

It seems the budget relied too much on improving economic growth – and that has in fact been the case for the past couple of years. Faster growth can indeed change the fiscal picture dramatically. But without a concerted and coordinated effort, it does not look like that will happen anytime soon.

What if even the moderate growth figures for the next three years are not reached? Thus the growth risk to fiscal consolidation and health remains way too high.

* Visit our Budget Special for all the budget news and in-depth analysis.

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