The lion versus the buffalo. When lions hunt together as a team they can bring down the biggest buffalo.
Radical economic transformation was not possible without maximum unity.
This was the deep and underlying message of Finance Minister Pravin Gordhan yesterday as he delivered a well-balanced Budget to millions of hopeful South Africans, interested global investors, and ratings agencies.
He referred to independent institutions, business confidence, transparent processes, the importance of policy certainty, the effectiveness of public spending and good budget allocation.
The message to ratings agencies was clear: South Africa will improve policy certainty and ensure that the state meets its regulatory and service-delivery obligations that will boost economic growth. The government would continue to work with business and labour to rebuild confidence and improve prospects for more inclusive growth, Gordhan said.
Rebalance Fund Manager Chris Harmse pointed out, “South Africa has a lot of strengths to build on.”
This is in line with Gordhan’s message of hope to middle income earners, small business owners and those living in rural areas. According to Harmse, the high increase in income taxes is a form a “wealth tax” that might have a negative effect on high income earners, however given the prospects of a lower economic growth Gordhan had to find additional tax income to keep the deficit and debt as low as possible. This was indeed a very difficult balancing act, well executed by Gordhan.
He did what was expected of him, focusing on the role of Treasury to support the objectives of the National Development Plan of 2011, and the government’s commitment to mass-based social and economic transformation.
Although the economic outlook for 2017 is marginally positive, “South Africa is seen as a small, open economy reliant on trade and capital flows. Our development relies on a fair, rules-based global trading and financial system”, Gordhan said.
Although many South Africans were relieved that VAT was kept unchanged on 14%, Gordhan warned that some changes will be implemented next year. One example is the scrapping of the zero rate on fuel. This indicates that should VAT be increased in the next budget, the fuel levy would be kept unchanged.
The rand showed little interest and traded in a narrow band between R13.06 and R13.09 before, during and after the Budget speech.
Economists agreed yesterday that the government had made progress in transforming the economy over the past 22 years, that affirmative action policies and redistributive spending succeeded in creating jobs and business opportunities for specifically black South Africans.
Gordhan and his team at National Treasury should be praised for striking the correct fiscal balance, one economist pointed out.
Gordhan has sent a clear message that the government’s programme of radical economic transformation must be based on sound economic and constitutional principles.
He understands that policies not based on sound economic and constitutional principles will fail.
He reminded South Africa that about two-thirds of the budget each year – this year about R1 trillion of R1.5 trillion - is used for the realisation of social rights such as education, health care, social security, housing, water and sanitation.
Gordhan’s Budget strikes the right balance – asking the rich to contribute a little more, while promising that government will re-double its commitment to using public resources more effectively to improve the lives of the poor and to transform South African into a more equitable society.