Gordhan still steady on tightrope

THERE was nothing minor about Pravin Gordhan’s ‘mini budget’ address on Wednesday, as the embattled finance minister once again walked a tightrope to tackle SA’s multiple funding challenges and avert the impending doom of a ratings downgrade to junk status.

The mid-term budget policy statement – a usually quieter follow-up on the main annual address in February – spells out the government’s financial priorities over the next three years and proposes adjusted provincial and local government allocations.

But with the country facing several controversial fiscal issues, such as government’s debt exceeding R2-trillion, the costly nuclear deal and how Treasury intends to find the promised extra R16.3-billion to fund universities over the next three years, all eyes looked to Gordhan’s game plan.

‘The economic environment this year is unusually difficult,’ said Gordhan.

‘We have faced extraordinary challenges.

‘In the lead-up to this year’s policy statement, we have been acutely aware of the depth of these stresses and the diverse interests and expectations of South Africans.’

While he avoided the contentious issue of the planned nuclear programme, he said R17-billion has to be put aside for universities over the medium term to subsidise fee increases for poor households.

Subsidies to universities and students will grow at 10.9% each year with transfers to the National Student Financial Aid Scheme growing at 18.5%.

To stay clear of the fiscal cliff, Treasury is aiming for measured consolidation to avoid contraction in expenditure, prioritise capital investment and stabilise the national debt.

Tax trouble

With a predicted revenue shortfall of R23-billion this year, additional tax increases of R13-billion will be introduced in 2017/18.

This is over and above the R15- billion announced in February‚ bringing total tax increases next year to R28-billion.

Another R15-billion will be added in 2018/19. Gordhan, as expected, downgraded SA’s economic growth rate for the current year from 0.9% in the February speech, to 0.5%.

The economy growth forecast for next year is 1.3%‚ 2% in 2018 and 2.2% in 2019‚ though Treasury has admitted its forecasts have historically tended to be somewhat optimistic.

Gross loan debt as a percentage of gross domestic product, which tends to be closely watched by credit ratings agencies, has increased to 51.3% for 2016/17 and is set to rise further to 52.5% in 2017/18 and 53% in 2018/19.

Debt service costs this year will amount to R148-billion.

Teamwork

On a positive note, Gordhan reiterated his strong belief that milestones can be accomplished if all sectors join forces for change. ‘

There is a saying ‘Ditau tsa hloka seboka di shitwa ke nare e hlotsa’, which means, lions that fail to work as a team will struggle to bring down even a limping buffalo.

‘What we seek, and more, can be done if we collectively make the right choices, support confidence and investment in our economy, create a predictable and stable policy and political environment and put the national interest first.

‘Either we work as a South African pack or we miss our chance.

HAVE YOUR SAY

Like our Facebook page and follow us on Twitter.

For news straight to your phone invite us:

WhatsApp – 072 069 4169

Instagram – zululand_observer