Gordhan passes baton to business
Government wants entrepreneurs to be the actual engines of growth and development in the country
FINANCE Minister Pravin Gordhan expects the private sector to replace government as the main engine of growth over the next three years.
After his budget speech this week, Gordhan underscored his intention to support the corporate sector to encourage it to play a larger role in the economy.
“What you’ve had for the last five years is the public sector leading the private sector, which has retreated in investment and growth. The private sector has to go for it, and there are many things in the system to support this,” Gordhan said.
However, this didn’t mean that the state would reduce social grants to support the poor majority, or stop the plan to create 6 million jobs over the next five years.
The budget kicked off with a resounding endorsement of the National Development Plan (NDP), viewed by business as a convincing blueprint for faster growth, job creation and poverty alleviation. There was a long list in the Treasury’s budget review linking the goals of the programme with initiatives already in place.
“Government here presents concrete plans, concrete programmes backed up by real money. These are not theories, these are not wishes, these are not things we would like to do, they are things that are actually being done,” Gordhan said.
Personal income tax relief of R9.3billion this year comprised mainly the usual inflation adjustments to counter bracket creep.
There were only modest increases in social grants for children, the elderly and the disabled.
Spending growth excluding interest payments was capped at an average of 1.9% over three years, a touch below the 2.1% increase projected in the Treasury’s mediumterm budget review in October.
Salaries for government employees, the biggest chunk of official spending, were projected to rise at an annual rate of 6.4% in the period ahead, well below a level likely to be accepted by the unions.
Infrastructure spending, crucial to easing electricity and transport bottlenecks in the economy, was kept constant at R845-billion despite the recent sharp depreciation of the rand, which will raise the cost of imported capital goods.
Gordhan and Reserve Bank governor Gill Marcus both played down the weakness in the currency, saying ahead of the budget that it not only presented opportunities for exporters, but should also allow for import substitution.
“It’s about balance — it’s good to have it weaker up to a point but overshooting is dangerous for house- hold budgets, and places pressure on the costs of imported goods and the cost of capital,” Gordhan said.
Manufacturing development incentives were allocated R10.3-billion over three years, R15.2-billion was provided to business to upgrade machinery and productivity, and over R7-billion was earmarked for subsistence and small-scale farmers.
There was renewed focus on corruption, cutting waste, improving state capacity and strengthening partnerships between the government and private sector.
The Treasury finally unveiled comprehensive proposals to support small and medium-sized businesses, which are struggling.
“We must recognise the fault lines on the economic front and recognise that muddling along isn’t an option — we need to do different things and do them boldly,” Gordhan said.
Nomura analyst Peter Attard Montalto said this was less of an election budget and more of a rallying cry for government to get its act together.
“Who will follow that cry after the election is debatable. Who will be in charge of the National Treasury after the election is a topic of much speculation in itself,” he said.
Gordhan was adamant that ANC policy would not change after the election, and refused to be drawn on whether he would remain in his position, saying it would be up to the president to decide.
“The bottom line is we are optimistic about the next five years. There is enough money to both support the social wage and to take various initiatives to support the business world,” he said.