We need to deal with the ex­e­cu­tion deficit, says min­is­ter

CityPress - - Business - MAR­CIA KLEIN business@city­

Fi­nance Min­is­ter Nh­lanhla Nene has not been home for a month. He got off a plane in Dur­ban on Fri­day evening, just two days after de­liv­er­ing his first medium-term bud­get speech, to at­tend a business din­ner. But he planned to go home to his wife, who left teach­ing to start a small farm­ing project, and then at­tend a fam­ily wed­ding. By the time you read this, he is in London for more meet­ings. It has been a re­lent­less few weeks, as can be ex­pected for some­one whose job is to tell South Africa, and the rest of the world, the bad news that our econ­omy is in a strait­jacket and to present limited op­tions to loos­en­ing it.

This week, Nene de­liv­ered a tough, no-non­sense medium-term bud­get pol­icy state­ment. It pointed to higher taxes – to col­lect R27 bil­lion from over­stretched mid­dle class, work­ing peo­ple and put the brakes on ex­ces­sive gov­ern­ment spend­ing – to save R25 bil­lion. Th­ese are un­pop­u­lar state­ments and re­flect the dwin­dling num­ber of op­tions at his dis­posal.

Most shock­ing, though, was the ad­justed growth rate which, at 1.4% and ris­ing to 3% by 2017, might still be op­ti­mistic. At this level of eco­nomic growth, job cre­ation is almost im­pos­si­ble and the Na­tional De­vel­op­ment Plan (NDP) – which needs growth – looks fan­ci­ful.

Nene be­lieves he has pro­duced a pack­age of fi­nan­cial op­tions that is “re­al­is­tic” given our chal­lenges, which re­quire tough mea­sures.

He is not sure this is enough to ward off rat­ings agen­cies, which are con­sid­er­ing low­er­ing the coun­try to junk sta­tus in in­vest­ment terms.

“It is dif­fi­cult to know how they are go­ing to re­spond,” he said. “We have a cred­i­ble pack­age on the ta­ble, we are look­ing at what is hu­manly pos­si­ble and we think they un­der­stand the po­si­tion.”

Nene is aware they might un­der­stand, but could turn around and say his plan was sim­ply not good enough. “I got my first re­sponse, from Stan­dard & Poor’s, which is the most con­ser­va­tive of all [the rat­ings agen­cies] and they said we did ad­dress all the is­sues the rat­ings agency had raised.” The agency said it was look­ing to see if gov­ern­ment walked the talk, and this was Nene’s mis­sion. “We need to deal with the ex­e­cu­tion deficit we have,” he said.

There is some scep­ti­cism that squeez­ing gov­ern­ment’s ex­pen­di­ture is eas­ier said than done, con­sid­er­ing the ex­cesses that are ev­i­dent, and the lack of con­trol over them.

Nene said gov­ern­ment had al­ready proved it could tighten its belt. Since for­mer fi­nance min­is­ter Pravin Gord­han started the belt-tight­en­ing ex­er­cise, there have been R500 mil­lion of sav­ings within eight months.

Gov­ern­ment is look­ing at sell­ing a few as­sets or en­ter­ing into strate­gic part­ner­ships, which some have in­ter­preted as pri­vati­sa­tion. Nene says this is noth­ing new.

Gov­ern­ment is look­ing at what el­e­ments of state-owned en­ti­ties fit its de­vel­op­men­tal agenda and those with com­mer­cial in­ter­ests. Op­tions in­clude work­ing with the pri­vate sec­tor in part­ner­ships, find­ing eq­uity part­ners and sell­ing non-core as­sets.

His most un­pop­u­lar ac­tion, which is ex­pected to be an­nounced in Fe­bru­ary, is a tax hike that is likely to be met with huge re­sis­tance by South Africa’s work­ing classes, who have al­ready shown their in­tol­er­ance to new taxes, like e-tolls.

“We all go to church and we want to go to heaven, but get­ting there is painful,” said Nene.

His big task, come Fe­bru­ary, is to match the needs of a de­vel­op­men­tal state with a ca­pa­ble state. “We are cog­nisant of the chal­lenges we have. You need a ca­pa­ble de­vel­op­men­tal state which is re­spon­sive to those chal­lenges.” His is in­formed by the NDP, whose main aim is to re­duce the cost of do­ing business and the cost of liv­ing for the poor. With tax hikes on the hori­zon, this looks like an un­en­vi­able chal­lenge. NO NON­SENSE Fi­nance Min­is­ter Nh­lanhla Nene presents his medium-term bud­get pol­icy state­ment in Par­lia­ment this week. His stance was bear­ish and un­com­pro­mis­ing


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