Prudence, but not austerity, was the theme of the Budget presented to Parliament yesterday by Finance Minister Pravin Gordhan.
In the face of lower economic growth and tax revenues, the government would have to cut its cloth to size, Gordhan emphasised.
The minister also announced personal tax relief of R7 billion, which will leave a few extra rand in South Africans’ pockets, as well as measures to assist small businesses and a tax incentive to encourage employers to hire young jobseekers.
“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.” He said the Budget was motivated by prudence and the government would redirect departmental spending and make some cuts, but it did not intend imposing any austerity measures.
“We cut expenditure, but this government will not cut expenditure to the point we impose austerity,” Gordhan said yesterday at a media briefing ahead of his Budget speech.
His comments came amid anti-austerity protests in several European countries, including Italy, where voters concerned over debt and looming cuts failed to return a clear majority government. 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.
Proposals on how to fund the planned National Health Insurance scheme are to be discussed later and a review of the tax system will be undertaken, headed by Judge Dennis Davis.
Gordhan said the social wage did not replace the government’s goal of a society in which most people earned their income through work, but it was needed to redress inequalities of the past and the 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.
Gordhan said the government would reprioritise departmental allocations, redirect unspent funds and possibly sell – not privatise – state assets to get more 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.
In his Budget speech, Gordhan said the Treasury was probing 76 entities for possibly infringing 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, although legislation is outstanding – a crackdown on tax avoiders looms, with Gordhan saying the authorities were “deeply concerned” that tax avoidance was increasing, especially by high-bracket corporates and individuals.