A belt-tightening budget on the cards for Pravin Gordhan

RAYMOND GOSS

Pictured: RAYMOND GOSS, Head of Wealth Management, Investec, South Africa, looks into the budget crystal ball.

His announcements will be closely monitored by the nation as well as the rating agencies. This will be an austere budget, providing for an increase in taxation, while reducing expenditure.  

It will focus on the restoration of confidence and a commitment to a policy of fiscal discipline within the context of South Africa’s challenging economic future and will continue to build on the sombre tone set by President Jacob Zuma during his State of the Nation address.

The Minister will be correct to point out the cyclical challenges facing South Africa as emerging markets have fallen out of favour on the back of a collapse in commodity prices and slowing demand from China.  

Perhaps left unsaid, but no doubt the elephant in the room, will be the structural issues that have come to plague our economy – the result of a series of government and parastatal blunders that have drained our financial resources.  

This budget matters because our growth has stalled, because we are on the verge of losing our investment grade status, because the cost of servicing our debt will become unaffordable and because our social grant programme, so essential in a country with the largest wealth imbalance in the world, will be in jeopardy.

Government must commit itself to focusing on growth and service delivery. As a country we can no longer afford waste based on poor policies, poor implementation, cronyism and corruption.

We should not lead the world in burgeoning public sector employment and cumbersome government departments who introduce bureaucratic red-tape and regulations which serve only to stifle human talent and drive away essential skills. The Minister will need to closely monitor government’s desire to own and manage mega capital projects, such as the proposed nuclear reactors, as it has clearly demonstrated its inability to control costs and meet acceptable delivery targets.

Minister Gordhan will be aware that, starting in 2003, South Africa experienced a golden cycle of growth based on a strong currency, capital investment, jobs and increasing revenue. He will want to set the foundations from which we can once again grow and will look to unlock the potential of all participants in the economy.

Whether he will go as far as cutting debt via the privatisation of key assets, such as the blatantly mismanaged South African Airways, Eskom and the Airports Company of South Africa, may, unfortunately for now, be a bridge too far.