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IT was a stirring Budget speech, one befitting a general giving his troops an inspirational speech before a major battle, and one that drew Finance Minister Pravin Gordhan a standing ovation at a joint sitting of Parliament.

He deserved the accolades because he was honest and did not hold back the truth: growth in South Africa is slowing down.

Despite this harsh reality, the government still has a constitutional requirement to meet.

This said Gordhan was: “All who live in our country should have access to housing, medical care, social security, water and education. There should be a progressive realization of access to tertiary education and other elements in a comprehensive set of social entitlements. Wealth and economic opportunities must be equitably shared.”

For these demands to be met and for a win-win environment to be created, South Africa needs an economy that is flourishing, not one that is battling. Everyone wins when the economy
is blooming: profits are up and Government collects more taxes. But there are many losers when hard times impact the economy.

As Gordhan said: “These commitments impose obligations on government – and have implications for the business sector and all stakeholders. We have a shared responsibility to address the social and economic challenges before us.”

His overview of South Africa included pointers that:

  • Income growth has been uneven – the bottom 20% have benefited from social grants and better access to services, the top 20% have benefited from the rising demand for skills and pay increases. Those in the middle have been left behind;
  • Wealth remained highly concentrated – 95% of wealth was in the hands of 10% of the population;
  • At least 35% of the labour force were unemployed or had given up hope of finding work;
  • More than half of all children in Grade 5 could not read adequately in any language;
  • More than 50% of all school-leavers each year entered the labour market without a senior certificate pass. 75% of these will still be unemployed five years later;
  • Towns and cities remained divided and poverty was concentrated in townships and rural areas; and
  • Growth in South Africa has been too slow. A mere 1% a year in real per capita terms over the past 25 years.

 

“These are our realities. They mirror the stresses of poverty and vulnerability in many developing countries, and the inequality between rich and poor throughout the world,” said Gordhan.

The Budget, according to Gordhan, like the initiatives of national, provincial and local government, was a critical lever of change and also to unite South Africans.

However, because of the economy, South Africa was again at the crossroads. “Tough choices have to be made to achieve the development outcomes we seek.”

Not only was economic growth slow, but unemployment was far too high and many businesses and families were under stress.

“We face an uncertain and complex global environment. At the same time we face immense transformation challenges – we must overcome the inequalities and divisions of our society. All South Africans must share in a more prosperous future,” Gordhan believes.

The Government, he said, did have a plan for a more inclusive and shared economy. “Its implementation requires greater urgency and effective collaboration among all
social stakeholders.”

Among the key features of the Budget
he presented was redistribution in
support of education, health services and municipal functions in rural areas, which remained the central thrust of Government spending programmes.

“Our state-owned companies and finance institutions play a substantial role in infrastructure investment and financing development. Their borrowing requirements are taken into account in the overall
fiscal framework.”

There was a larger purpose a moral vision and intent behind the Government’s plans and programmes. “We need to build a new national consensus and a new commitment to deliver, focused on the triple challenges of poverty, unemployment and inequality. President Zuma articulated this intent in the State of the Nation Address, rightly emphasizing the radical nature of the socio- economic transformation we need.

“Our growth challenge is intertwined with our transformation imperative. We need to transform in order to grow, we need to grow in order to transform. Without transformation, growth will reinforce inequality; without growth, transformation will be distorted
by patronage.”

Notwithstanding the economy, over the medium term, expenditure on public services would continue to grow moderately above inflation. “Though the fiscal envelope is constrained, billions of rands have been shifted to meet new needs. A substantial additional allocation to higher education is again proposed, adding R5 billion to the R32 billion previously announced. After debt service and post-school education and training, the fastest-growing spending categories are health, social development, and community and economic infrastructure.”

The Government, Gordhan, stressed would continue to safeguard expenditure that protected poor households. “But the medium term expenditure limits are tight. Across all three spheres of government, and in state-owned companies and public entities, those responsible for deciding how money is spent have to do so with scrupulous rigour and care. It is only right that if households and firms face tough choices in balancing their income and expenses, the same disciplines must be applied in public expenditure.”

He continued: “Our state-owned companies and finance institutions play a substantial role in infrastructure investment and financing development. Their borrowing requirements are taken into account in the overall fiscal framework.”

Gordhan called for accountability to ensure public funds were used for their intended purposes. In Mahatma Gandhi’s phrase: “Democracy is not a state in which people act like sheep.”

South Africans, said Gordhan, were
not like sheep. The new reality is that state-owned companies will find themselves under more intense scrutiny. The public will not take too kindly to paying higher taxes while those who are supposed to serve them live
it up.

The disclosure in February and early March that the acting CEO of Prasa, Collins Letsoalo, had demanded and received a 350% increase and the speed with which he was turfed out is an indication the Government is taking its austerity message to civil servants.

But one swallow doesn’t necessarily mean summer’s here. The tax-payer needs to see more of this if he/she will is to become less cynical. State-owned companies will have to come down to earth and be part of the national belt-tightening effort.