THE African National Congress (ANC) expressed its confidence in SA’s ability to weather the current economic challenges after Finance Minister Pravin Gordhan delivered his 2016 budget on Wednesday afternoon.
Mr Gordhan delivered his first budget speech after his reappointment as finance minister by President Jacob Zuma in December. His return was a result of the backlash from the markets to Mr Zuma’s axing of former finance minister Nhlanhla Nene. The address was upbeat and hopeful, attempting to rally South Africans at a time of dismal economic growth and sluggish global conditions.
The budget contained a higher tax burden for all except low-to-middle-income earners, a higher fuel levy and a lower rate of growth in government expenditure, which will help the Treasury fill the holes left in its budget by lower revenue collection. It was underpinned by what some economists will regard as overly optimistic economic growth forecasts, which the Treasury projects at 0.9% this year, 1.7% in 2017 and 2.4% in 2018.
The ANC hailed Mr Gordhan’s budget as one of "hope", which advanced "people’s power" and responded adequately to the aspirations of all South Africans.
"It is clearly aimed at rebuilding confidence in the economy as well as re-igniting dynamic, responsive and inclusive economic growth. The budget further reaffirms the ANC government’s commitment to fiscal consolidation while enhancing social spending and accelerating infrastructure investment to boost growth and development," ANC spokesman Zizi Kodwa said on Wednesday.
Mr Kodwa welcomed the reallocation and reprioritisation of resources to higher education after months of student protests over the cost of tertiary fees and accommodation. He said "strong initiatives" were outlined to increase efficiency and cut the cost of doing business within government and state-owned entities in particular.
"We further welcome plans to rationalise the state-owned enterprises to phase out those that are no longer viable, including the possible merger of South African Airways and SA Airlink, thus easing the drain on the national fiscus," Mr Kodwa said.
"The budget has addressed the most critical issues that must be addressed. It has prioritised the most pressing challenges of our people and the priorities of the ANC government."
The Democratic Alliance (DA) was not convinced that the budget tabled had gone far enough to avoid a ratings downgrade. Finance spokesman David Maynier expressed disappointment that Mr Gordhan made no clear commitment to roll over the employment tax incentive, which lapses in January next year.
The incentive scheme was hotly opposed by the Congress of South African Trade Unions (Cosatu) and remains a point of contention in the alliance. Mr Maynier said the minister did not announce any significant new measures to boost economic growth and create jobs, and fell short on his stated commitment to fiscal consolidation.
He said the minister could not fix the economics without fixing the politics and this was limited by the "political space" inside the alliance between the ANC, Cosatu and the South African Communist Party.
"We were disappointed that instead of tax increases the minister did not announce other revenue raising measures such as the sale of nonstrategic state assets, which could have raised billions in revenue. We were also disappointed that the minister did not announce real spending cuts including reducing the size of President Jacob Zuma’s bloated cabinet, which could save up to R4.7bn," Mr Maynier said.
Concern over the size of the cabinet was reiterated both by the Economic Freedom Fighters and the Congress of the People.
Reaction by business was largely positive, with Chamber of Mines CEO Roger Baxter saying Mr Gordhan’s budget "struck all the right notes" and represented a "positive contribution to stabilising the economy, to maintaining an investment-grade rating and to creating stimulating partnerships in pursuit of growth".
The Chamber applauded the minister’s initiatives to instil prudent macroeconomic policy and reduce the deficit, focusing specifically on the efficiency of state spending.
"We also appreciate the recognition that we need to tread a careful path between raising taxes that stifle investment and growth, and finding a direction that creates greater tax revenue, while enhancing investment and growth. Over time a shift from growth-negative direct taxes towards growth-enhancing indirect taxation is necessary if SA is to achieve a sustainable higher growth rate," the Chamber said.
It further said it was pleased that no substantive changes were made to mining taxation or the mineral royalty system and the fact that the draft Carbon Tax bill would be revised, taking into account public comments and further consultation.
The South African Chamber of Commerce and Industry also largely welcomed Mr Gordhan’s budget and noted his focus on collaboration among stakeholders, and the need for partnerships, particularly with business. Its CEO, Alan Mukoki, congratulated the minister for not increasing value added tax, for limiting personal tax increases and for providing relief of R5.5bn to mainly low-and middle-income earners.
Mr Mukoki, however, cautioned that the increase of 30c/l to the fuel levy was set to effect transport negatively, and lead to an inflationary increase in the price of goods and services.
"(The chamber of commerce) is encouraged by the emphasis that the minister placed on inclusive growth, the plan for a strong mixed economy, improvements in education, investment in infrastructure and acceptance (of) partnerships between government, business, organised labour and civil society as pre-requisites for policy coherence and more rapid development," Mr Mukoki said.
"Moves to reduce the regulatory burden on business and a reduction in the administrative costs of starting a business are reassuring."
Finance Minister Pravin Gordhan, right, greets President Jacob Zuma, centre, and Deputy President Cyril Ramaphosa shortly before delivering the budget speech in Parliament on Wednesday. Picture: TREVOR SAMSON
THE African National Congress (ANC) expressed its confidence in SA’s ability to weather the current economic challenges after Finance Minister Pravin Gordhan delivered his 2016 budget on Wednesday afternoon.
Mr Gordhan delivered his first budget speech after his reappointment as finance minister by President Jacob Zuma in December. His return was a result of the backlash from the markets to Mr Zuma’s axing of former finance minister Nhlanhla Nene. The address was upbeat and hopeful, attempting to rally South Africans at a time of dismal economic growth and sluggish global conditions.
The budget contained a higher tax burden for all except low-to-middle-income earners, a higher fuel levy and a lower rate of growth in government expenditure, which will help the Treasury fill the holes left in its budget by lower revenue collection. It was underpinned by what some economists will regard as overly optimistic economic growth forecasts, which the Treasury projects at 0.9% this year, 1.7% in 2017 and 2.4% in 2018.
The ANC hailed Mr Gordhan’s budget as one of "hope", which advanced "people’s power" and responded adequately to the aspirations of all South Africans.
"It is clearly aimed at rebuilding confidence in the economy as well as re-igniting dynamic, responsive and inclusive economic growth. The budget further reaffirms the ANC government’s commitment to fiscal consolidation while enhancing social spending and accelerating infrastructure investment to boost growth and development," ANC spokesman Zizi Kodwa said on Wednesday.
Mr Kodwa welcomed the reallocation and reprioritisation of resources to higher education after months of student protests over the cost of tertiary fees and accommodation. He said "strong initiatives" were outlined to increase efficiency and cut the cost of doing business within government and state-owned entities in particular.
"We further welcome plans to rationalise the state-owned enterprises to phase out those that are no longer viable, including the possible merger of South African Airways and SA Airlink, thus easing the drain on the national fiscus," Mr Kodwa said.
"The budget has addressed the most critical issues that must be addressed. It has prioritised the most pressing challenges of our people and the priorities of the ANC government."
The Democratic Alliance (DA) was not convinced that the budget tabled had gone far enough to avoid a ratings downgrade. Finance spokesman David Maynier expressed disappointment that Mr Gordhan made no clear commitment to roll over the employment tax incentive, which lapses in January next year.
The incentive scheme was hotly opposed by the Congress of South African Trade Unions (Cosatu) and remains a point of contention in the alliance. Mr Maynier said the minister did not announce any significant new measures to boost economic growth and create jobs, and fell short on his stated commitment to fiscal consolidation.
He said the minister could not fix the economics without fixing the politics and this was limited by the "political space" inside the alliance between the ANC, Cosatu and the South African Communist Party.
"We were disappointed that instead of tax increases the minister did not announce other revenue raising measures such as the sale of nonstrategic state assets, which could have raised billions in revenue. We were also disappointed that the minister did not announce real spending cuts including reducing the size of President Jacob Zuma’s bloated cabinet, which could save up to R4.7bn," Mr Maynier said.
Concern over the size of the cabinet was reiterated both by the Economic Freedom Fighters and the Congress of the People.
Reaction by business was largely positive, with Chamber of Mines CEO Roger Baxter saying Mr Gordhan’s budget "struck all the right notes" and represented a "positive contribution to stabilising the economy, to maintaining an investment-grade rating and to creating stimulating partnerships in pursuit of growth".
The Chamber applauded the minister’s initiatives to instil prudent macroeconomic policy and reduce the deficit, focusing specifically on the efficiency of state spending.
"We also appreciate the recognition that we need to tread a careful path between raising taxes that stifle investment and growth, and finding a direction that creates greater tax revenue, while enhancing investment and growth. Over time a shift from growth-negative direct taxes towards growth-enhancing indirect taxation is necessary if SA is to achieve a sustainable higher growth rate," the Chamber said.
It further said it was pleased that no substantive changes were made to mining taxation or the mineral royalty system and the fact that the draft Carbon Tax bill would be revised, taking into account public comments and further consultation.
The South African Chamber of Commerce and Industry also largely welcomed Mr Gordhan’s budget and noted his focus on collaboration among stakeholders, and the need for partnerships, particularly with business. Its CEO, Alan Mukoki, congratulated the minister for not increasing value added tax, for limiting personal tax increases and for providing relief of R5.5bn to mainly low-and middle-income earners.
Mr Mukoki, however, cautioned that the increase of 30c/l to the fuel levy was set to effect transport negatively, and lead to an inflationary increase in the price of goods and services.
"(The chamber of commerce) is encouraged by the emphasis that the minister placed on inclusive growth, the plan for a strong mixed economy, improvements in education, investment in infrastructure and acceptance (of) partnerships between government, business, organised labour and civil society as pre-requisites for policy coherence and more rapid development," Mr Mukoki said.
"Moves to reduce the regulatory burden on business and a reduction in the administrative costs of starting a business are reassuring."
News, views and analysis of Finance Minister Pravin Gordhan's 2016 budget
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