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LIVE BLOG: Budget 2016

24 February, 2016 10:40

BDFM editor-in-chief Peter Bruce and Rand Daily Mail editor Ray Hartley comment live on the Budget during Finance Minister Pravin Gordhan's speech in Parliament. REFRESH THIS PAGE TO VIEW UPDATES.


RAY HARTLEY: I must agree. Not since Genghis Khan announced he was floating the Mongolian Tughrik, has a financial statement been this anticipated. And it lived up to these heightened expectations. Peter Bruce is on the floor searching for a mention of the nuclear programme, muttering something under his breath...


For now, thank you and good afternoon. And a big thanks to Riaan Wolmarans, who helped out with the shiny interesting bits in between the words.



PETER BRUCE: Well, it could have been better but it could also have been much MUCH worse. I hope the markets approve. The rand is flickering around R15.55/$. I’m banting so the fizzy drinks tax won’t hurt me. Thanks for joining us. I hope you had a little fun on this serious day.



RAY HARTLEY: Thunderous applause. While we wait for Peter Bruce's pithy summary, my two cents' worth. I think he has pulled it off. There are some serious proposals to slash public spending ... wait, here's Peter Bruce!



PETER BRUCE: Of course, budgets are destined always to under deliver. Reading Nhlanhla Nene’s last budget I come across this wildly optimistic pledge: “With effect from May this year (2015), all school building plans will be standardised and the cost of construction will be controlled by the Office of the Chief Procurement Officer. Too often, and for too long, we have paid too much for school building projects.”


Well, I could have sworn Jacob Zuma said exactly the same thing in his State of the Nation address a few days ago. Is that how it works? The finance minister announces it and you announce it again a year later. I laughed because Zuma said schools would from now on be built for a fixed price. Someone should tell him what inflation is...


RAY HARTLEY: Gordhan wraps it up: "We can turn today’s adversity into opportunities.


"We can address the weaknesses that create policy uncertainty, we can build on the strengths that are our resource base, our institutions and our workforce. We can do things differently where we need to innovate.


"We have avoided reckless policies which might have dragged us into recession or reversed the capital flows we need. We have a sound macroeconomic and fiscal framework, and the will to work together for faster and inclusive growth."


And then he thanks everyone.


A pithy take on what it all means from Peter Bruce will follow shortly. The keyboard is hammering away here next to me...



RAY HARTLEY: Gordhan mentions his predecessor - for three days - Des van Rooyen and there are loud jeers in the house. Van Rooyen is in charge of local government now ...



RAY HARTLEY: A whole bunch of municipalities are going to disappear after a 'merger process'. Let's not hope that the political axe will not be wielded against the opposition here ...


PETER BRUCE: R598m to public order policing and just R5.7bn to holding ‘varsity fees steady… do the two go together?


RAY HARTLEY: Have to agree with Peter Bruce. SAA is going to be put through the washing machine and come out the other side with a new board. Dudu is probably heading for a deputy ministry ...



PETER BRUCE: And if Pravin is confident enough to not even mention nuclear, and this after showing his speech to the President yesterday, just imagine what’s in store for Dudu Myeni when he says about merging SAA and SA Express “under a strengthened board”...



RAY HARTLEY: Loudest applause so far for a promise to allocate billions towards student financial aid.




PETER BRUCE: OK so the budget speech is now spread all across Ray Hartley’s office floor and I still can't find a mention of nuclear! How did that happen? Where did it go?


RAY HARTLEY: Gordhan says loudly and clearly: "We are NOT talking about privatisation".


Then he says: "The strength of our major state-owned companies does not lie in protecting their dominant monopoly positions, but in their capacity to partner with business investors, industry, mining companies, property and logistics developers, both domestically and across global supply chains."


RAY HARTLEY: Gordhan says that SAA and SA Express will be merged with a 'minority equity partner'. This is as close as you will get to privatisation ...



PETER BRUCE: Debt service costs under this budget will nonetheless reach R178.5bn in 2018/19, say the documents. That must take into account the exciting new, improved exchange rate (and the interest rates that accompany it). At 250 (say) working days a year, that means we’ll pay R712bn a day in interest. I think that excludes state-owned companies...


RAY HARTLEY: There will be a partial amnesty for those who have undisclosed foreign assets. In exchange for declaring, they will pay tax on only half their earnings since 2010 as I understand it.


Download the full Budget speech here from the Treasury.


RAY HARTLEY: And we have reached a new milestone: This is surely the longest time that the EFF benches have remained seated and silent in at least two years.



PETER BRUCE: By the way, the rand has sunk to R21.62 to sterling since Pravin began talking (it was around R21.26 when he started), and R15.56/$.



PETER BRUCE: I don’t want to be unfair, but surely the markets (the people we borrow money from) would be looking for more than fiscal readjustment, which is what Pravin is doing. There’s no growth in this. No structural reform, unless and until he can put meat on the bones of the state-owned company actions he has spoken about. No reform, I suspect, not much sympathy from the markets.


RAY HARTLEY: This from the speech on taxes:

"Our tax proposals include the following:

– Personal income tax relief of R5.5 billion, which partially compensates for inflation, focused mainly on lower- and middle-income earners;

– An increase in the monthly medical tax credit allowances;

– An increase of 30 cents a litre in the general fuel levy;

– Introduction of a tyre levy to finance recycling programmes, increases in the incandescent globe tax, the plastic bag levy and the motor vehicle emissions tax;

– Introduction of a tax on sugar-sweetened beverages; and

– Increases of between 6 and 8.5 per cent in the duties on alcoholic beverages and tobacco products."



RAY HARTLEY: Gordhan turns to taxes. He starts by praising 'one of the most effective tax authorities in the world'.


PETER BRUCE: Critically, Gordhan has borrowing falling over the three year term, not rising, as Nhlanhla Nene did in October. In fact, debt service costs would be R135.3bn in 2017-18, down from the R140bn estimated by Nene in October.


But the only way he can sustain that is by cutting costs and raising taxes…


Concomitant action, as it were.


RAY HARTLEY: A whole of government contracts are going to be 'renegotiated' to bring down costs. Must be some nervous tenderpreneurs out there.


Here's something useful:



RAY HARTLEY: Tax revenue is going to fall short of what was expected, but it is still higher than last year.


RAY HARTLEY: "Now we come to the tough part," says Gordhan before explaining, "We cannot spend money we do not have. We cannot borrow beyond our ability to repay. Until we can grow, we have to be tough on ourselves."



PETER BRUCE: Defence, public order and safety services get an 16% bump to R204bn….


Does someone know something the rest of us don’t?


PETER BRUCE: “Minister Brown is in discussion with Transient’s leadership on measures to accelerate private sector participation in the ports and freight rail sector. The intention is to improve efficiencies, reduce the costs of doing business and increase investment in new port facilities and inland terminals.”


The Guptas will be pleased...


PETER BRUCE: There's an additional R16.3bn for higher education over next three years, R5.7bn for 2016 fees undertakings.



RAY HARTLEY: Gordhan quotes Nene: "If we do not achieve growth, revenue will not increase. If revenue does not increase, expenditure cannot be expanded.” That's the man that Zuma fired in the December fiasco, now known as '9/12' in government circles...



PETER BRUCE: “It seems clear that we do not need to be invested in four airline businesses. Minister Brown and I have agreed to explore the possible merger of SAA and SA Express, under strengthened board, with a view to engaging with a potential minority equity partner.” – Pravin


It’ll take a hell a negotiation to get SAA pilots to work under the same terms as SA Express though...


RAY HARTLEY: Peter Bruce is scouring the budget for any mention of the nuclear programme ... nothing so far.


RAY HARTLEY: Gordhan looks to India for how to reform the structure of the economy to "boost investor sentiment". In South Africa, the NDP must be "converted into action".


RAY HARTLEY: "South Africa’s economic prospects are intertwined with global economic developments. A period of unprecedented monetary stimulus in response to the 2008 recession is not yet over, and global volatility and structural imbalances are far from resolved. What this means is, every day when you wake up, don't be surprised."



PETER BRUCE: Coal and gas projects to be included in the IPP promo going forward...


RAY HARTLEY: Gordhan picks out this piece of advice from a citizen: "What we should stop doing: Corruption and waste. Bailing out state entities."


Try tuning into the live feed:



RAY HARTLEY: The budget starts with the bad news: Drought, slow growth and the rising expectations of citizens - “the combination of multiple demands and constrained resources”.


Download the full Budget speech here from the Treasury.


PETER BRUCE: "If we act together we can address declining confidence…we are conscious of the difficulties we face"


PETER BRUCE: Pravin starts with a rousing intro. Stronger foundations, effective government, dignity for working people..bold and constructive leadership, a will to find common ground. Let us unite… we believe we do have a plan


RAY HARTLEY: Gordhan kicks off with a promise of ‘a spirit of frankness’. He says:

“I have a simple message from government: We are strong enough, resilient enough and creative enough to overcome our economic challenges.”


RAY HARTLEY: The Speaker begins proceedings. So far, no disruptions from the EFF benches as Pravin Gordhan rises to speak.


PETER BRUCE: Stats SA estimates South Africa’s manufacturing output at last month to be roughly equal, seasonally adjusted, to what it was in March 2006.


PETER BRUCE: Good afternoon and welcome to this #Budget2016 blog with myself and Ray Hartley. Ray is in charge of the facts. I’m doing fashion, atmosphere and snark. Just to remind you, the government forecast  VAT revenue for the current year of R260bn, income tax R350bn and company tax at R183bn. Servicing its debt, it said, would cost R126bn. That’s around R500m a day...


RAY HARTLEY: The Minister of Finance, Pravin Gordhan, in a dark suit is making his way up the steps of Parliament amidst a throng of photographers. He has rock star status right now ahead of the most anticipated budget speech of recent times. Over to Peter Bruce.



RAY HARTLEY: Well, this sets the scene: Just hours before Pravin Gordhan's budget, President Jacob Zuma has confirmed a swathe of increases for officials in the public service. To be fair, these have been some time in the making and are the recommendations of an 'independent' commission. But the timing of this announcement shortly before the finance minister is expected to announce belt-tightening measures and tax increases, is very poor. It sends the message that, come what may, the civil servants will eat first.



Join us just before 2pm today as two of our most experienced editors comment live on the Budget speech as it happens in Parliament.


In the meantime, read the Business Day editorial on Gordhan walking a fiscal tightrope, see what lessons Hartley has learnt from five budget speeches since 1994, or find more Budget articles on BDlive's Budget page.


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