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Cape Town - Pragmatic economic realities drove South Africa's fiscal framework rather than politics, said Finance Minister Pravin Gordhan. He was commenting on the country's Medium-Term Budget Policy Statement (MTBPS) released on Tuesday.
"The political [context of South Africa] does not mean taking wrong choices," said Gordhan at a press briefing shortly before tabling his maiden MTBPS in parliament.
Gordhan's comments follow speculation that his head could be turned by the politicking of the ANC's left-wing alliance partners, Cosatu and the SA Communist Party (SACP).
In the context of President Jacob Zuma's promises of a shift in economic policy, Gordhan said that the global financial meltdown should have led to a "paradigm shift" in all governments, business and individuals.
Unless South Africa's government and business leaders provided the right kind of intellectual and policy leadership, South Africa would be left behind, Gordhan said.
"South Africa needs to take serious stock of its economic model," he said. "It is not about state versus markets.
"It's about better synergy between government and business." Gordhan would not comment further on the much talked-about policy shift Zuma had promised.
"I will leave that to the president to pronounce on," said Gordhan. The budget was committed to saving by improving government efficiency and also redirecting money to priority areas, he said.
The bottom line was that fiscal discipline had to prevail at all costs and that "tough choices" would have to be made for South Africa to pay off its deficit, which Gordhan estimated would be 7.6%.
He warned that the fiscal space South Africa had enjoyed over the past decade would not be there over the next three years.
"There is no new money," said Gordhan. He outlined that government had no choice but to stay fiscally conservative, especially in a challenging environment.
This was because debt had to be repaid as quickly as possible so that government could be in a position to do more in good times.
Gordhan, who does not anticipate a quick domestic recovery, would not say how long it would take for South Africa to reduce its budget deficit.
He added, however, that if the recovery was quick it could take two years. If not, a five-year recovery period could be anticipated.
- Fin24.com