South Africa, Business

BUDGET 2017: Political uncertainty overshadows tight “transformation” budget

By Ranjeni Munusamy 22 February 2017

Taxes are going up, as anticipated, with top earners feeling the biggest pinch in an effort to raise an additional R28 billion in revenue. Finance Minister Pravin Gordhan has presented a restrained Budget in tough economic conditions, with increasing demand on the fiscus and a R30 billion revenue shortfall this year. This year’s Budget walks the ANC’s talk on “economic transformation” with two-thirds dedicated to “realising social rights” and redistributing resources from the urban economy to rural areas. But the tone of the Budget is subdued with the ever-present danger of President Jacob Zuma’s axe hanging over the Minister and Deputy Minister of Finance. By RANJENI MUNUSAMY.   

At a media briefing before his speech on Wednesday, Gordhan said he had briefed Cabinet earlier in the day about the 2017 Budget. “There was full alignment on what we’re going to present you,” he told journalists.

Asked if this meant that criticism directed at the National Treasury by Zuma and his Cabinet colleagues had now been assuaged, Gordhan said he could not talk about what transpired at Cabinet meetings and explained the rigorous process behind the compilation of the Budget, including the role of the Cabinet committee and consultation across government. But judging by the attacks Gordhan and the National Treasury have been facing from within the ANC and Cabinet colleagues, pressure remains high to loosen the purse strings and relax the strict controls on spending.

Gordhan made the point that if there are new needs, these had to be prioritised by government and if additional funds were required, it had to come from within what had already been allocated. In other words, something has to be cut in order to respond to new demands.

But the Budget does not respond to the political pressure. As with Zuma’s State of the Nation Address, there is no mention the nuclear build programme. There is no additional allocation for Social Development Minister Bathabile Dlamini’s SASSA dilemma or response to Water and Sanitation Minister Nomvula Mokonyane’s demand for extra funding for her beleaguered department. Gordhan and his department are sticking to the path of fiscal consolidation and reducing the expenditure ceiling by R26 billion over the next two years.

The 1.56 trillion Budget leans pro-poor with R490.4 billion allocated to social grants, R320.5 billion to education, and R187.5 billion to health. According to Treasury’s Budget Review document, debt-service costs, which amount to R162 billion in the 2017/18 year, continues to be the fastest growing element of the Budget, “diverting critical resources from frontline services”. 

“Raising taxes when the economy is struggling is undesirable, but unavoidable, given the current fiscal circumstances. Government is acutely aware of the difficult economic conditions facing the majority of South Africans, but deferring tax increases by accumulating more public debt would ultimately impose a greater burden on citizens,” the document states.

In the speech, Gordhan makes no bones about the fact that this is a tough Budget and calls for a “national consensus” and a new commitment to deliver. “Our financial situation is difficult but we have still produced a credible budget,” he said.

At the media briefing earlier, Gordhan swatted away questions about the rumoured “deployment” of former Eskom CEO Brian Molefe to the ministry but emphasised that the Treasury was a “highly professional institution” that should not be “messed with”. He said institutions take many years to build, including their effectiveness, work culture and resilience, but could be dismantled overnight. 

Gordhan said questions about him and Jonas being “fired” were undignified.

“We are here asked to play this role. Our record is very clear about what we have delivered. As the president choses to redeploy us, that’s his decision. We have no appeal mechanism… You’re either in or you’re out. We are very much alive to that situation.”

Asked by Daily Maverick whether it mattered who served in the positions of minister and deputy minister, Gordhan responded: “We work very well as a team. I suppose it does matter.”

Jonas warned that patronage had a direct impact on growth and inequality reduction efforts. In response to a question about the political risk of the ANC’s elective conference this year, Jonas said political noise impacted on the work of their department, particularly in undermining certainty over policy direction.

“With approaching conferences, political noise increases. This is not only a South African phenomenon – though it might be cruder in South Africa… It is complicated by deployment factors which sometimes fly against any logical thinking,” Jonas said. 

Treasury director-general Lungisa Fuzile admitted that the political uncertainty around his department had had a negative effect. He said in his six years in the job, he had served four finance ministers.

“It takes a bit of time to get into great chemistry and a good working relationship… I am a civil servant but I’m also human… The high turnover of ministers damages morale… I know this for a fact,” Fuzile said.

The story of the 2017 Budget is not so much in the facts and figures – although these do paint a bleak picture of the state of our nation: slow growth necessitating higher taxes.

The story of this year’s Budget was at the end of Pravin Gordhan speech when he issues a call for public intervention. This is what Gordhan said:

“Obstacles there will be many. Overcome them.

Detractors abound. Disprove them.

Negativity inspired by greed and selfishness will obstruct us. Defeat the bearers of this toxic ethic.”

“South Africans, wherever you are… Own this process; defend your gains; demand accountability. Be an active agent for change. Umanyano Ngamandla (Unity is power).”

Last year, when the Hawks were in the midst of their campaign to charge Gordhan, he called on South Africans to defend the National Treasury. Now, he is calling for more than just defence. He is putting the onus on South Africans “wherever you are” to get involved. 

In an extraordinary political time, this is no ordinary Budget. DM

Photo: Finance Minister Pravin Gordhan (Greg Nicolson)



Lord Hain requests formal investigation of Leave.EU Brexit campaign’s South African links

By Marianne Thamm

Bladerunner (1980s version) is a visual feast due in large part to the Hollywood Actors Strike. This allowed the designers an extra three months to refine the sets and props.