Finance Minister Pravin Gordhan’s “holding Budget” presented to Parliament has been termed cautious and “conservative” by a range of political parties.
In the face of lowered economic growth expectations and tax revenues and a projected deficit increase, Gordhan himself emphasised on Wednesday that the Budget was motivated by prudence and the government would cut its suit according to its cloth - through redirecting departmental spending and cuts - but that it did not intend imposing any austerity measures.
“We cut expenditure, but this government will not cut expenditure to the point we impose austerity,” the finance minister said before his speech.
His comments came amid continuing anti-austerity protests in several European countries. Euro zone instability is of major concern to South Africa as many of its trading partners are in Europe.
As in previous years, the finance minister announced increases in social grants, tax relief on medical aid and housing subsidies, as well as a higher income threshold for poor households to qualify for the local government grant-funded R275 subsidy that goes towards free services such as water, electricity, sanitation and refuse collection.
He also announced personal tax relief of R7 billion that would leave a few extra rand in taxpayers’ pockets, as well as measures designed to assist small businesses and a tax incentive to encourage employers to hire young job seekers.
Proposals on how to fund the planned national health insurance scheme are to be discussed later and a review of the tax system is to be undertaken, headed by Judge Dennis Davis.
Gordhan said the Budget was a balancing act as the social wage did not replace the government’s goal for South Africa to become a society in which most people earned their income through work, but it was needed to redress inequalities of the past and present.
Because of this, spending on social assistance would rise to R120bn, with old age and disability grants increasing in April from R1 200 a month to R1 260.
The balancing act meant the government had to cut its suit according to its cloth.
“We are saying to all of government: we do have a revenue squeeze. There are lots of things we want to do, but we have to manage the way we do that.
“We must apply our minds and say: what’s the best way in which we can finance the development programmes?
“You gotta cut your suit according to your cloth. You might walk in and say I want a suit, but you’ll only walk out with pants.”
Gordhan said the government would pursue a range of options to tailor its national coffers to the wish list of delivery. This would include the reprioritisation of departmental allocations, the redirection of unspent funds and the possible sale - not privatisation - of state assets amid a drive to tighten how the government did its business, to get bang for its buck.
Gordhan said the cabinet had bought into the reprioritisation.
“We could do much better. There are still examples of extravagance, whether it’s in relation to the size of the car you drive, the way in which you conduct certain activities. But those are on the margin. They reflect particular preferences and choices,” he said.
The Treasury is about to establish a chief procurement office to tighten loopholes in the government tender system. Gordhan said the Treasury was probing 76 entities for possibly having infringed procurement rules in contracts worth R8.4bn, while the SA Revenue Service was checking up on 1 000 business entities with contracts estimated at more than R10bn.
As the government tightens its tender system - a ban on public servants doing business with the state is a fait accompli - a crackdown on tax dodgers looms.
Political parties were almost unanimous in their response, broadly accepting what they termed a “conservative Budget”.
IFP spokesman on public finance Mario Ambrosini, however, said that so far, all Budgets had reflected the ANC-led government’s having no vision for economic leadership. This had reached the point of its “subcontracting” the formulation of such vision to the National Planning Commission.
“We are now on the vicious downward spiral of unsustainable social grants, growing unemployment, shrinking of the industrial basis for lack of genuine competitiveness, growing social unrest and protest,” he said.
The DA’s spokesman on finance, Tim Harris, said Gordhan had been forced to table a “conservative Budget, but he opened the door to key DA economic policies”.
Gordhan had failed, however, to table solutions to deal with the state’s “incapacity to spend on infrastructure”, with underspending of 22 percent over the past three years, Harris said.
The African Christian Democratic Party broadly supported Gordhan’s “conservative” Budget, spokesman Steve Swart said. “The minister has not departed from the government’s prudent, counter-cyclical fiscal policy.”
UDM deputy secretary Nqabayomzi Kwankwa said not all of the Budget was bad news, considering the challenges the country faced.
“(Gordhan) has presented us with a responsible Budget,” said Kwankwa.
Cope said the Budget was a clear commitment “to a conservative fiscal policy stance”.
“(Gordhan’s) foot is still clearly on the brake pedal as far as the expenditure side is concerned.”
The SACP welcomed the youth employment tax incentives.
Human rights organisation Black Sash welcomed “the attempt to relieve individuals and households on the burden of debt”. - Pretoria News