Budget reaction: DA’s Tim Harris

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BR Unemployment 313[1] Independent Newspapers Unemployed youths, who mostly have matric, still have the likelihood of learning new skills and least require state assistance.

Pravin Gordhan tabled a Budget that holds the line against populist pressure but provides no real tax concessions and few bold reforms to get growth going or tackle unemployment.

As usual, the minister made the right noises about implementing the National Development Plan (NDP), but we have had the plan in place for a year-and-a-half, and the government has little to report on implementation, especially when it comes to:

- Holding teachers to account for performance;

- Removing trade barriers;

- Increasing infrastructure spending, which is stuck at between 7 percent and 10 percent of gross domestic product;

- Regulatory reform to boost business growth;

- The introduction of strong incentives for special economic zones; and

- Public service reform.

Implementation has not happened because the ideological enemies of the NDP are many, at the highest level of government, and the president is not prepared to take them on.

This Budget shows that interventions like the Jobs Fund and the watered-down youth wage subsidy have had a limited positive impact, but confirms that only the private sector can create the millions of jobs we need.

In this regard, South African investors and entrepreneurs need to be sure that the government will do more than just “hold the line”, and will take tough decisions to make South Africa a better value investment destination.

They will not get this surety from this Budget, nor will they get simple concessions like a cut in taxes on employment such as the Unemployment Insurance Fund and Compensation Fund contributions. This would be affordable since these funds have a R17 billion combined surplus this year.

With respect to cost containment, the minister has set ambitious targets, but it is not clear what the consequences will be for ministers who do not deliver. If we do not meet these targets, we will be in trouble on the debt front because last year’s forecast that government debt would peak at 40 percent in 2015 has now changed to a new “peak” of 44 percent in 2016. Already, one rand out every 10 we spend goes to debt repayment.

The only solution is to get economic growth going, and – given the lack of real tax relief and the Davis Commission’s scathing assessment of our small business tax system – it is not clear that the small business tax reform ideas Gordhan floats go far enough.

If South Africa is to be put back on the path we set out on in 1994, we need to grow our economy at a much higher rate and create the millions of jobs needed to lift our people out of poverty.

* Tim Harris is the DA’s spokesman on finance.

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