VAT hike would have been regressive
Pretoria - Finance Minister Pravin Gordhan's 2016 budget speech was devoid of surprises, and also - rather sadly - lacking in much of the detail that South Africans had hoped for.
Following President Jacob Zuma's State of the Nation Address earlier this month, South Africans have been eagerly awaiting details as to how the country would avoid a ratings downgrade to junk, and boost the economy to more than the anticipated under a percent growth this year.
Zuma put the economy front and centre of his speech, indicating that SA needs to grow faster to ensure inclusive growth and that wasteful expenditure must be eliminated.
However, Gordhan's speech failed to explicitly address how government will eliminate wasteful spending, apart from noting that the office of the chief procurement officer would eliminate R25 billion a year by its third year of operation, freezing unnecessary posts and promises of cut backs that have been in the offing for years. Given that government's budget is worth more than R1 trillion, and it spends R500 billion a year on procurement, the R25 billion is a fraction of spending, and is almost an admission that corruption is eating away at taxpayers' money.
Gordhan did note "it is clear that we can achieve considerable savings to government, while also ensuring that procurement processes are streamlined and service providers are paid on time".
Gordhan's steps to trim spending come at a time when tax revenue is lower. A year ago, government had projected total tax revenue of R1.081 trillion. Now, the the revised estimate is R11.6 billion short, although 8.5 percent more than the 2014/15 outcome.
Notes Gordhan: "This is a most commendable effort in the circumstances: all South Africans have contributed, and the 14 000 staff of the [South African] Revenue Service have done a sterling job."
Government expects the budget deficit to be 3.2 percent of gross domestic product this year, which Gordhan says will be trimmed to 2.4 percent in 2018/19.
He notes additional spending on higher education, small business development, and amounts set aside for responding to the drought and other contingencies, are accommodated through stringent cost containment measures across all departments.
Measures the state will make include:
* A restriction on filling managerial and administrative vacancies, subject to review of human resource plans and elimination of unnecessary positions;
* Reduced transfers for operating budgets of public entities;
* Capital budgeting reforms to align plans with budget allocations while strengthening maintenance procedures;
* Mandatory use of the new e-tender portal, enforcing procurement transparency and accessible reference prices for a wide range of goods and services;
* A national travel and accommodation policy and instructions on conference costs;
* Renegotiation of government leasing contracts;
* New centrally negotiated contracts for banking services, ICT infrastructure and services, health technology, school building and learner support materials.
Gordhan added that government aims to stabilise debt as a percentage of gross domestic product. "Spending plans are reduced, a higher revenue target is set and net national debt is projected to stabilise at 46.2 percent of GDP in 2017/18, and to decline after that."
In his preamble, Gordhan said: "I have a simple message. We are strong enough, resilient enough and creative enough to manage and overcome our economic challenges.
"All of us want jobs, thriving businesses, engaged professionals, narrowing inequality, fewer in poverty.
" All of us want a new values paradigm, a society at peace with itself, a nation energised by the task of building stronger foundations for our future society and economy.
"We want our government to function effectively, our people to work in dignity, with resources for their families, decent homes and opportunities for their children.
"We want to see progress throughout our land, in agriculture, manufacturing, mining, construction, tourism, science and research, sport and leisure, trade and commerce.
"It is within our grasp to achieve this future.
"It requires bold and constructive leadership in all sectors, a shared vision, a common purpose, and the will to find common ground. Above all we need action, not just words."
Business Report