Finance Minister Pravin Gordhan on his way to deliver his 2016 Budget Speech. (Rodger Bosch, AFP) ~ AFP
Cape Town - Although it was a relief listening to smooth-talking Finance Minister Pravin Gordhan on the National Budget after the recent utterances of some other ANC leaders, sensible talk and sound rhetoric might not be all that the SA economy needs.
Gordhan was the right man for the moment. He is adept at reassuring investors and international rating agencies. The fiscal stance was conservative and in his own words “credible”, cutting excess spending as well as increasing revenue without hiking the main tax rates.
Gordhan also stressed the need for economic growth (“growth is the central question”) and the importance of the private sector and boosting small business. He said talks and cooperation between government and the business sector are already taking place, and announcements on co-investment will follow.
He also took pains to reaffirm government’s commitment to sound economic, fiscal and monetary policies. And he promised to be open about risks and challenges.
He even admitted that mistakes have been made (referring to the events that led to his own appointment in December as a 9/12, implying the catastrophic consequences they had).
He said policy certainty has sometimes been neglected, that the government tries - but does not always succeed - in spending taxpayers' money responsibly, that state-owned enterprises (SAA, etc.) are not sacrosanct entities and that big projects (nuclear power) will be thoroughly reviewed and monitored.
Chatting up the voters
But Gordhan is also the master of talking to the local electorate in an election year. He stressed that the government will cut away fat, but social spending will not suffer – “we will not burden our people with austerity”.
Tax increases mostly targeted the rich (capital gains and transfer tax on big property sales) and areas like excise duties, sin and environmental taxes and the fuel levy (which were expected and normally increase every year).
It was vintage Pravin Gordhan. Since his first appointment as minister of finance in the turbulent times during the big international financial crisis in 2009, he was careful not to raise taxes in the hope that economic growth will solve revenue concerns.
Taking care not to stifle economic growth by raising taxes or upset the applecart with sudden big announcements has been the long-time approach of the National Treasury in general.
But back then there was still plenty of fiscal space to move and no rating agencies looming in the background, threatening to downgrade South Africa's debt and investment position to junk status.
The problem does not lie with Gordhan and National Treasury’s fiscal stance or approach to the state's economic and financing role. The issue, as some analysts have already pointed out, is that they lack control over wider, growth-boosting structural economic reform.
The budget contained too much of the same familiar stuff. There’s not enough credibility in saying that the public sector is too big and the government wage bill unsustainable if you need “all departments” to play their part in correcting this.
'Giving lip service'
There is not much credibility in singing the praises of the private sector, stressing the importance of small and medium businesses and trying to promote SA as an investment destination if there is general animosity towards the role of “capital” among many government members.
If a government minister dismisses the disinvestment of a big mining company “as creating opportunities for others”, if regulation clearly and all too often stifles business activity, and if the economic empowerment of some and attempts at rectifying the past obviously damage economic effectiveness, you become sceptical.
SOEs' woes are no recent development – they have been a talking point for years. The same applies to using taxpayer’s money wisely as well as proper service delivery.
We need some real shifts forward. Gordhan and the National Ttreasury can show the way, but some new faces and voices are needed in the government.
Maybe Gordhan spoke truthfully when in response to a journalist's question about just “giving lip service” to limiting spending - especially on compensation in the public service - he said: “But that is exactly what a speech is”.
* Visit our special issue on Pravin Gordhan's 2016 Budget Speech.