Finance Minister’s Budget Aims to Tighten Govt Spending, Change SAA

In a highly anticipated and greatly watched budget speech that many are hoping will gird the South African economy and save it from a ratings downgrade, finance minister Pravin Gordhan was today even-keeled as he said the country needed to work together to grow, giving a few surprises, although probably not as many as were anticipated.

Pravin Gordhan delivering his budget speech. Source: Twitter @mylimeboots.

Gordhan stressed fiscal prudence, saying the government should not spend money it did not have. He also focused on establishing new infrastructure and creating new jobs. It was a budget that one business paper said was mostly about tighter government control on its spending and higher income taxes (except for low- to middle-income earners).

Some of the more important things in Gordhan’s speech (there is a video of the full speech at the end):

  • The minister said, soon after starting his speech, “What we (the government) should stop doing: Corruption and waste. Bailing out state entities.”
  • The word “nuclear”, as in a nuclear energy programme – which has been much criticised ever since it was first raised as a possibility in South Africa and was going to cost the country billions it didn’t have in the years to come – was not mentioned once. Coal and renewable energy, however, were mentioned.
  • The hugely indebted South African Airways is to be consolidated with South African Express with a “minority equity partner” and a “strengthened board”, which suggests current embattled chairwoman Dudu Myeni probably will not be there for much longer.
  • There will be a tyre levy to finance recycling programmes, a 30-cent fuel levy increase, as well as taxes on sugar beverages and increased tax on tobacco and alcohol products.
  • The Treasury plans to reduce the budget deficit over the next three years at a faster pace than previously projected.
  • A freeze will be placed on public sector employment from April, and there are plans to reduce public servants by 20,000 over the next three years.
  • Gordhan spoke about accelerating private sector participation in the ports and freight rail sector of the state-owned Transnet.
  •  He also announced changes in property transfer duties and capital gains tax

Business Day editor in chief Peter Bruce said on a blog at the end of the speech, “Well, it could have been better but it could also have been much MUCH worse. I hope the markets approve. The rand is flickering around R15.55/$.” The rand was hovering just above R15 this morning.

At the start of his speech Gordhan said that the broad plan was to

  • Manage our finances in a prudent and sustainable way,
  • Re-ignite confidence and mobilise the resources of all social partners,
  • Collectively invest more in infrastructure to increase potential growth,
  • Give hope to our youth through training and economic opportunities,
  • Protect South Africans from the effects of the drought,
  • Continuously improve our education and health systems,
  • Accelerate transformation towards an inclusive economy and participation by all, and
  • Strengthen social solidarity and extend our social safety net.

“We are strong and resilient enough to overcome our challenges,” Gordhan said.

Watch the full speech from today here: