Short-term budget

MINISTER of Finance Pravin Gordhan made a clarion call for unity and economic prudence in his medium-term budget speech in Parliament on Wednesday.

Gordhan had no choice. The revised growth target of 0.5 percent for the fiscal year of 2016 and the 0.7 percent growth predicted for 2017 are not encouraging, given the harsh economic challenges, political uncertainty and prevailing social upheaval.

The country’s debt, standing at more that R2 trillion and generating interest repayment of R147 billion a year, is also cause for deep concern.

However, Gordhan tried to sound positive and announced some good news. Over R900bn will be spent on infrastructure – this could stir economic activity.

State-owned enterprises, which have largely been mismanaged and are riddled with corruption, will no longer be given billions in virtually unconditional bailouts, although indications that the problematic nuclear energy deal will be pushed through under the auspices of Eskom and the Department of Energy struck a jarring note.

Gordhan also promised reductions of R26bn in public spending over the next two years and vital increases in the education budget following months of student protests. .

ON THE other hand, about R43bn in additional taxes will be raised in the same period, but there were no details on specific areas of tax increases.

Taxpayers and business managers should get ready for serious hikes next year when deferred taxes such as the sugar tax and the carbon tax are almost certain to be implemented.

Usually, medium-term budgets outline plans that cover up to five years ahead, but this time it was different. The budget seemed to be more a survival strategy to stave off rating agency downgrades and generally get through another couple of especially lean years, than a longer step-by-step plan.

All of us should take heed: unity and austerity in the short term are needed more now than in many years.