Finance Minister Pravin Gordhan. Picture:  REUTERS/SIPHIWE SIBEKO
Pravin Gordhan. Picture: REUTERS

FINANCE Minister Pravin Gordhan is unlikely to deliver on one of the key deliverables necessary to avoid a credit ratings downgrade of SA to junk status, the privatisation in whole or in part of state-owned enterprises, Democratic Alliance (DA) finance spokesman David Maynier said Monday.

Economic growth, one of the other key criteria used by credit ratings agencies in their assessment of SA was largely out of the minister’s hands, but he was likely to deliver what was necessary to satisfy the ratings agencies with regard to fiscal consolidation.

Action on state-owned enterprises would be constrained Mr Maynier said by Mr Gordhan’s lack of political space. He and DA deputy finance spokesman Alf Lees presented the DA’s recommendations for the budget at a media briefing ahead of the tabling of the 2016-17 budget in Parliament on Wednesday by Mr Gordhan.

Nondelivery on state-owned enterprises would put a downgrade in the balance. "I think a ratings downgrade on the basis of that is almost inevitable," Mr Maynier said.

Rather than having any tax increases at all, Mr Maynier argued that government should sell its approximately R11bn stake in Telkom as well as nonstrategic immovable assets such as land and buildings that could also raise billions of rand. The proceeds of such asset sales should be ring-fenced for use on infrastructure development. The privatisation of the technically insolvent South African Airways (SAA) should be top of the agenda.

"The view that the minister has a ‘free hand’ to do what he likes seems exaggerated, especially given the back peddling on retirement reform following political pressure from the Congress of South African Trade Unions (Cosatu)," Mr Maynier said at a media briefing.

Mr Gordhan’s capacity to do things differently would be limited by the political space available inside the tripartite alliance.

Cosatu, for example, would oppose an extension of the employment tax incentive and the sale of state-owned assets — both of which the DA believes are necessary. It has called for an extension of the employment tax incentive, which comes to an end at the end of this year, for a further three years to help reduce unemployment.

The incentive encourages employers to employ people aged between 18 and 29. According to DA figures, about 36,000 employers have provided more than 250,000 jobs to young people at the cost of R3.9bn under the incentive scheme.

Mr Maynier called for a review of the implementation of the incentive to improve its design and implementation and for funds to be allocated for its further extension.

"We do not want to balance the budget on the backs of young people who do not have jobs or who have given up looking for jobs," Mr Maynier said.

The DA also called for a comprehensive, rapid review of government spending to identify savings and eliminate wasteful expenditure.

"A good place to start cutting spending would be on President Jacob Zuma’s bloated Cabinet, which could be reduced to 15 ministries saving approximately R4.7bn per year," Mr Maynier said.

Mr Lees noted that there was a lot of government expenditure that could be cut quickly and radically but which had not been targeted by the Treasury so far.