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wealthy taxpayers will bear the brunt of a hefty R28bn package of tax hikes this year, aimed at covering the biggest undershoot in revenue since the 2009 recession and speeding up the pace of transformation in the economy, finance minister Pravin Gordhan said in the National Budget unveiled on 22 February.
National Treasury left its modest economic growth forecasts for the coming three fiscal years unchanged and said that disciplined targets for budget deficits, debt and spending cuts remained on track. It is forecasting growth of 1.3% this year, 2% in 2018 and 2.2% in 2019.
But the Budget for the financial year 2017/18, which starts on 1 March, also focused heavily on new steps to address the inequality which has persisted in the country since the demise of apartheid.
“Growth in itself as we all know doesn’t generate equality or social justice – more needs to be done to make all South Africans benefit from economic growth,” Gordhan told reporters in a media conference before the Budget was tabled in Parliament.
A “strong conversation” was needed between government, business, labour and civil society on how to foster inclusive growth, as the country’s current levels of inequality and poverty were “unacceptable and immoral,” as well as out of line with its constitution, he added.
Gordhan’s rhetoric echoed President Jacob Zuma’s call for “radical economic transformation” in his State of the Nation Address earlier in February, but it does not mean that top Treasury officials will remain in place after an imminent Cabinet reshuffle likely to favour the president’s closest allies.
Concerns over the event’s possible impact on the Treasury dominated the media briefing, with journalists repeatedly asking Gordhan, deputy finance minister Mcebisi Jonas, and director-general Lungisa Fuzile whether they thought their jobs – and Treasury’s policies – were safe.
The responses from all three were blunt, and ominous for prospects that SA will keep its investment-grade credit rating this year. “It can take many years to build a solid institution – it takes a short time to mess it up,” Gordhan said.
The impact of patronage – perceived as pervasive in Zuma’s administration – was also discussed. “Patronage has a direct impact on growth, inequality and development generally,” Jonas said. Both Gordhan and Jonas are embroiled in court battles with the influential Gupta family, close friends of the president, who were implicated in the controversial State of Capture report released by former Public Protector Thuli Madonsela last year.
Former Eskom CEO Brian Molefe – who resigned due to the report’s allegations of his involvement with the Guptas – is expected to be sworn in as a member of Parliament, and speculation is rife that he will replace either Gordhan or Jonas.
Credit rating agencies would then be likely to downgrade SA’s sovereign rating to junk status – an event which Gordhan is credited with averting last year by spearheading a drive to unite business, labour and government.
Treasury emphasised that government’s objective was not to transfer ownership of assets or opportunities to contract the state, but to change the economy’s structure.
“Government is committed to massbased transformation that generates meaningful black participation in the economy and raises per capita incomes across the board, rather than a narrow change that merely transfers ownership, benefits an elite and perpetuates inequality,”