Finance Minister Pravin Gordhan will have his work cut out when he delivers his medium-term Budget policy statement next week against a backdrop of wildcat strikes on mines, downgrades by international rating agencies and a troubled global economy.
At home, consumers are struggling with rising food prices, while the petrol price is just under R12, and commentators are expressing concern over high household debt, often on the back on unsecured credit from financial institutions.
Then add politics to the mix: this week’s high-level dialogue on the economy between the government, business and labour, hosted by President Jacob Zuma, came days before Gordhan is to deliver the mini Budget, which sketches government’s view on the economy and sets out a broad framework of what is affordable and can be expected in the Budget.
On Thursday the Presidency announced concrete steps such as “a water maintenance programme in the next Budget to address water leaks and create jobs”, although others, such as the Mzimvubu Dam in the Eastern Cape, have been on the agenda for a few years.
A key aspect of the “joint economic package” is improving the living conditions of miners – whose life in the filthy shacklands of Nkaneng came under a glaring public spotlight amid the Marikana labour protests – and support for the commission of inquiry, which resumes on Monday.
Economic Development Minister Ebrahim Patel, a former trade unionist, became the public face of the dialogue rather than Gordhan, whose National Treasury has been criticised in certain ANC and Cosatu circles as a home to “conservative elements” blocking radical and speedy transformation of the domestic economy.
Gordhan was in Japan when the first meeting took place last Friday, but attended Wednesday’s gathering.
Also, while the government has adopted both the National Development Plan (NDP) and the New Growth Path (NGP), the dialogue endorsed the latter, which is broadly backed by labour and the ruling party, with some reservations.
Econometrix chief economist Azar Jammine raised misgivings about the dialogue since social partners are already brought together at the National Economic Development and Labour Council (Nedlac), and the cabinet-approved NDP provided a long-term blueprint.
However, Jammine said, the impact of strikes might not be as great as anticipated. To the extent gold and platinum mines had been productive during the strikes, they had benefited from increased prices, and the economic outlook was set to stabilise next year.
The finance minister may well dip into the government’s R5.8 billion contingency reserve to balance the books.
Budget headaches may arise over the call for a 12-month freeze on executive pay as it could cost SA between R5bn and R7bn in lost tax revenues, Jammine said, based on rough calculations by Econometrix on the basis that R71.8bn of this year’s projected R295.7bn tax revenue comes from those earning R1m a year or more.
Some business entities, such as the SA Chamber of Commerce and Industry, expect further details on this freeze on Thursday, including who would be expected to participate, given that most of its members run their own businesses.
Chamber CEO Neren Rau said small, medium and micro enterprises had been hit hard by the strike-ridden economic environment. “The consumer is increasingly under pressure, especially at a time when we need him,” he said, adding the chamber would look forward to stimulus measures, even if overall economic growth was revised downwards.
For Cosatu, pointers towards a pro-growth, pro-jobs economy, reduction of interest rates, and concrete indications on implementing particularly infrastructure development are anticipated, said spokesman Patrick Craven.