Cape Town - South Africa was not about to “fall over a fiscal cliff” and there was no need for the pessimism that some were peddling about the country’s prospects, Finance Minister Pravin Gordhan said on Thursday.
“I think that too there are too many people outside this country who are making judgment calls… who don’t understand our history well enough, who don’t understand where we come from as a country and as a political culture and who make negative pronouncements that are way out of line… with the realities of political developments in this country,” Gordhan said.
“There’s no catastrophe that’s going to hit our country at this point in time. There’s no need in my view for the pessimism that some are reflecting.
“We will have difficulties. We will have challenges… (but) we have survived worse than this to get to where we are today.”
He was briefing journalists ahead of delivering his Medium Term Budget Policy Statement, which holds government spending to that set in the February 2012 Budget over the next three years.
Gordhan acknowledged the impact on the economy of the Marikana shootings and the wildcat strikes the August 16 tragedy triggered across the mining sector (though the full cost has yet to be calculated) - as well as policy uncertainty ahead of the ANC’s conference at Mangaung in December.
But he insisted the country was “on safe ground” in terms of its finances.
“What we are able to do as government is to reassure South Africans that we have an extraordinarily sound and sustainable fiscal framework.
“We are fiscally safe, we’re not about to fall over any cliff,” he said, referring to automatic spending cuts and tax hikes due to take effect in the United States from January next year.
Despite global economic uncertainty and the downturn stifling growth, job creation and lopping R5 billion of expected income from taxes, Gordhan said there was “enough money in the system” to deliver on key programmes and to foot the social wage bill. Reduced revenue collection meant the budget deficit would be higher at 4,8 percent of GDP.
He said Cabinet’s decision not to increase the amount of money available beyond the ceiling set in February a “firm commitment” to fiscal sustainability – necessary to keep the country’s debt, which he expects to peak at 39 percent of GDP in 2015/16, under control.
Around R40 billion in savings over the next three years had been made possible by stripping budgets of fat and reprioritising spending within and between departments, he said. From this will come the money needed to pay the R461m bill for hosting the 2013 Africa Cup of Nations soccer tournament, which South Africa agreed to do after Libya’s meltdown but had not budgeted for, as well as R450m to upgrade Mthatha’s airport and to settle a R118m bill for contractual penalties incurred by Denel after SA cancelled its order for A400M aircraft.
Other spending adjustments include a R188m VAT bill the new SA Agulhas Antarctic research vessel, R80m for extra game rangers to fight rhino poaching in Kruger Park and R63m to deploy vessels and resources in joint anti-piracy operations in the Mozambique channel.
Revised provincial allocations include R366m to revamp old hospitals and build new ones and R4 bn to meet higher than anticipated public sector wage increases.
On the government’s questionable capacity to implement its programmes and to spend budgets efficiently, Gordhan said the state had to up its game – and get better value for its investments, particularly in education.
“There’s no doubt… that we in government have to up our game with regard to implementing policies and making more efficient use of resources – and ensuring that where large sums of money are assigned, we get much better quality of outcomes than we’ve been getting up to now,” he said.
But he said there was progress as instead of asking for more money, departments were instead focused on how to better use available resources to fund new projects. - Political Bureau