The consensus on Minister of Finance Pravin Gordhan’s Budget suggests good things to come, says Jessie Duarte.
The overwhelming agreement on Minister of Finance Pravin Gordhan’s Budget indicates two things. The first indicator points to a strong and astute political leadership, which has a responsibility over the country’s economic framework and outlook.
This leadership confronts the reality of having to respond to global challenges, which means they need to keep abreast of the current twists and turns in global economics. At the same time they need to ensure that our economy continues to grow in order to meet South Africa’s national imperatives.
The second indicator shows that our government has an efficient and knowledgeable management of our country’s fiscal policy. We may not always agree with Treasury on a range of fiscal measures, but what is certain is that we have developed a solid team in this area of government. Also, these fiscal policy measures are the very ones that have in the past enabled our country to absorb the shocks resulting from the global financial crisis.
These remain trying times in world markets. The international economy has not recovered fully from the effects of the global financial crisis. Recent tapering by the Federal Reserve, at the time when our economy is beginning to stabilise, has shocked emerging markets throughout the globe. We have seen the effects on our currency weakening. Of course, in our context this has both a positive and a negative impact. On the positive side it means better gains for our export sector.
Consequently, as President Jacob Zuma urged the role players in the mining sector in his State of the Nation address this week, it is imperative that stability returns and productivity is realised so we can take advantage of this period. This is particularly important in the platinum belt, which is our prized commodity, where there are protracted strikes.
On the negative, a weak currency will have an adverse effect on our infrastructure roll-out due to high costs.
It is therefore important to commend Treasury’s steadfastness in curbing expenditure. The positive outcomes are evident in the deficit expected to come in at 4 percent in 2013/14, which is lower than what most economists had forecast earlier. It is expected to go below 3 percent after 2015. These are commendable efforts given our lacklustre economic growth of 2.7 percent in the current year and a generally difficult global economic environment.
The R847 billion investment in infrastructure over the coming three years is a critical intervention in our government’s attempt to stimulate growth in the economy. Infrastructure build creates the necessary and conducive conditions whereby the private sector can participate.
Coupled with the infrastructure roll-out are the interventions in the key sectors of the economy such as manufacturing, mining, energy and agriculture and agri-processing. These sectors also hold out the potential for job creation. Regarding mining and agriculture, as has been recognised by the Ministry of Home Affairs, it is imperative that we tighten our immigration policy to manage the influx of foreign nationals into these sectors.
Given this context, the challenge is quite clear for the private sector. The government, as Gordhan did in his Budget speech, acknowledges that the private sector is critical in the job-creation effort. In particular, white capital should overcome the seeming scepticism and negativity that inhibits its investment in the South African economy. It is therefore necessary for genuine partnerships and a social compact between the state and the private sector, including labour, to be developed.
Support and various incentives, totalling R6.4bn over three years, aimed at the Small & Medium Enterprise sector are a welcome injection to the economy. This sector is critical in creating jobs and ensuring economic activity. It is high time that we saw the re-emergence of the small black businesses and small and medium-sized entrepreneurs in our communities. It is, therefore, important that bodies such as the National African Federated Chamber of Commerce and others take advantage of the opportunities availed in this Budget. In similar vein, the call for greater co-operation between black and white entrepreneurs is important.
A welcome aspect is the R9.3bn tax relief. Although some critics seem to think this is minuscule, cash to taxpayers – particularly for the low and average earners – means a difference between being with or without basic needs.
For us it is important that the relief seeks to cushion the middle class, in particular the emerging black middle class which forms the bulk of earners between R350 000 and R750 000 annually. The lower strata, earning below R350 000 annually, is the bigger beneficiary. This is significant in our policy attempts to ensure inclusion and participation of the majority in economic activity and consumption. But it also goes a step further towards assisting people to save, as also seen in the changes proposed to pension and provident funds. These efforts give the necessary impetus to our economy.
We are further gratified by the fact that more spending has been directed towards the social wage. All reports reviewing the 20 years of the ANC government, for example Goldman Sachs and South Institute of Race Relations, among others, show social spending and the Expanded Public Works Programmes have been the difference between life and outright destitution in many poor households.
Consequently, while efforts are being made to create jobs and to grow the economy, the government continues with its responsibility to ameliorate the impact of poverty among the majority of our people.
In addition to the increases for the indigents are continued allocations to the priority areas, in particular education and health. We have already seen how investment in these areas has improved the lives of many South Africans. Access to quality health care and quality education is essential to realise a better life for all, as recognised in the National Development Plan.
Our government’s ability to increase the opportunities that enable every citizen to reach their capability is fundamental to our country meeting the challenges of the 21st century and beyond. Education, therefore, remains a cornerstone in lifting the lower strata of communities out of poverty. At the same time, it creates the required skills pool to work in the modern economy. It goes without saying, therefore, that for such a society to continue being productive it must be healthy as well.
The challenge for the state is to ascertain that such health care is not a privilege of a select few, hence the importance of the universal health coverage – as was announced in the Budget speech – to reach even the poorest.
The fact that Gordhan was able to make these increases, and do a balancing act on fiscal expenditure and an unpredictable global economic climate, is commendable. It is clear to us that an inclusive economy, an efficiently managed fiscal policy and a directed social wage are important ingredients to making ours an even better country.