HAS Nenegate so changed the world that the social partnership spelt out in Wednesday’s budget could work? Finance Minister Pravin Gordhan declared that the budget "rests on the idea of an inclusive social contract". He talked of inclusive growth and of the need to overcome race and class divisions to work together for a growing and fairer economy.
Faced with pressure to tear up any possible partnership by transferring the burden of austerity to the poor, Gordhan refused, showing a much greater understanding of the requirements of market-led growth than those who wanted a short-term fix for which the country would pay far more in conflict later. So there is no value-added tax increase, social grants have been increased slightly and tax changes are designed to relieve the burden on lower-and middle-income earners.
But he also recognised the need to restore business confidence — Gordhan has been meeting business leaders recently and the speech reflected this. Among the commitments were the easing of red tape that restricts business activity, strengthened business incentives, and an enhanced private role in both infrastructure and state-owned enterprises. There is no personal income tax or company tax increase, although capital gains tax will rise.
In depth: Budget 2016
News, views and analysis of Finance Minister Pravin Gordhan's 2016 budgetThe speech also contains commitments that would benefit business — and, arguably, everyone else. They include monitoring spending by state-owned enterprises and a plan to rationalise them and improve their governance, cuts on government spending on managerial and administrative staff (but not people who provide services), and commitments to ensure that all levels of government, including municipalities, spend on what the country needs, not what those who run them need. And there will be widespread relief that no money is budgeted for nuclear energy programmes.
Labour is also invited to contribute to fashioning improved dispute-solving procedures intended to reduce strikes — union benefit funds are also expected to contribute to infrastructure development. Its members will gain from tax breaks for provident fund members
This approach offers a much greater prospect of growth than the alternatives. But sceptics will point out it contains many "ifs". It will work only if the Treasury and its allies enjoy the clout to begin making the government work in the way the budget speech says it will. This will threaten vested interests within government and their private allies, who will resist. It also assumes business and labour are willing to co-operate despite much business mistrust of the president and labour’s internal fractures. The joint effort to turn the economy around envisaged in the speech looks good in theory, but it could be argued it has been tried before, and did not work.
But Gordhan’s approach has a better chance of success than the nay-sayers believe, because Nhlanhla Nene’s firing created a possible platform for a new approach within the government and by private interests. It brought home to many in the government the dangers of losing the confidence of the key economic actors and of being seen not to spend public money to serve the citizenry. This could strengthen the Treasury’s hand, particularly if it can rely on a more active role for the private sector.
Business leadership remains deeply distrustful of the president but, after December, it is clear he no longer decides what happens in the Treasury. President Jacob Zuma’s recent claim that Des van Rooyen was more qualified than Gordhan did not help — it simply made clear that Gordhan was forced on him. This may draw a clear distinction between Treasury and the president, making it easier for business to deal with a Treasury in which it does have confidence, secure in the knowledge that the president has no veto on agreements.
Labour may be fractured and fractious but, like all urban interest groups, it peered into the abyss after Nene’s sacking and didn’t like what it saw. So it too may be willing to contribute in ways it would not have considered before December.
The budget’s partnership approach is the economy’s best way forward. And December’s events may, ironically, mean this time, it might just work.
• Friedman is director of the Centre for the Study of Democracy
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