WEALTHY THE MORE WILL PAY

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Finweek English Edition - - IN DEPTH BUDGET -

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.

Trea­sury shake-up?

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.

Tax hikes

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,”

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