A TAME BUDGET IN LIGHT OF MAY 8 ELECTION

IN THE lead-up to the Budget, most analysts predicted there would be no fundamental changes, given it being an election year. And so it proved to be: no major amendments to tax rates, no changes to fiscal policy, and spending remained balanced year on year. Right down the middle of the road then.

The speculation remains that Minister of Finance Tito Mboweni is steadying the ship after former finance minister Nhlanhla Nene’s resignation, and that he has no intention of returning to the seat after the elections. Although he has denied this, the nature of his brutal honesty at times would lead us to believe that it may actually be the case.

Many keys to the future can be found not in terms of what is in the Budget, but by what is not there: the National Health Insurance (NHI). One line in the speech, in brackets, was the entirety of the input to the NHI programme.

The bill has been back and forth between the Ministry of Health and the Presidency, and this may be an indication that its implementation may be staggered given the fiscal constraints and the costs associated with NHI. It is also important to remember that the increase in VAT was considered to be the funding mechanism for NHI, but that has been utilised for the phased-in free education programme.

With regard to the public sector wage bill and rationalisation of government, the Budget did not announce any retrenchments for the public service, but rather other interventions such as early retirements and cutbacks on performance bonuses and pay progression.

Nothing was said about the rationalisation of the government. We do know from last year’s State of the Nation address that the president does hold a view on the size of the Cabinet and, by extension, the number of ministries.

It seems we must wait until after elections for further news on this as it remains a guarded secret. After the announcement on the wage bill, there was the necessary outcry from organised labour.

I do think we are getting the consultation process with organised labour wrong. Almost daily we are seeing media reports of labour threats and this is eroding the positive sentiment that was generated by last year’s Jobs Summit.

It is also not good for investors’ perception of the economy. The executive does hold a responsibility to consult organised labour and it is my view that in these trying times, Nedlac (National Economic Development and Labour Council) should be meeting monthly to ensure that issues are raised and resolved.

Although the minister spent a lot of the speech on state-owned enterprises (SOEs), much of its focus was on Eskom and the SABC. I think we may be moving towards a level of private investment for Denel and SAA. Given that, of the SOEs, these are the two with the least developmental agenda, this points to government taking a hybrid approach towards SOEs.

And what do we make of the chief reorganising officer (CRO)? National Treasury will now attach a requirement for a CRO (likely of their choice) to be appointed if investment or a bailout is provided to an SOE.

It will be interesting to know how this impacts on the ability of boards of directors to make appointments, and who the CRO reports to. Clearly the Treasury is taking extraordinary steps to ensure their investments are protected and that their contingent conditions are met.

An interesting Budget, and perhaps a sign of the times to come in terms of policy direction. We must look at the Budget within the context of an election year. I think that after May, we may see fundamental reforms and a different spending pattern emerge.