EDITOR’S

FINANCE Minister Pravin Gordhan sought the impossible yesterday: to have his cake and eat it too. At least he tried. Mindful of the scrutiny that the country faces from credit rating agencies, he chose to reassert South Africa’s standing as a country with prudent financial credentials.

The surprise reduction in the budget deficit that he announced in his speech is certainly going to go a long way to assuage concerns raised by Moody’s Investors Service and Fitch over the past three months about the outlook of government finances.

The agencies feared that increased pressure from the ANC’S labour allies and its youth league for a more interventionist approach to address the country’s triple curse of rising poverty, unemployment and inequality would stoke run-away spending by the government this year and beyond.

Clearly, Gordhan calculated that the last thing South Africa needed at this point in time was to upset those investors who buy our debt and risk having our credit rating slashed.

Considering the euro zone debt mess that has rocked Greece, Italy, Spain, Ireland and Portugal, it is a wise move to rein in the budget deficit. Hopefully, the markets will reward Gordhan for this.

Where the big problem lies with his approach, though, is in the fact that a reality check actually warrants us to be spending more money to provide meaningful, not token, incentives to small and medium-sized businesses so that they can create sustainable jobs.

In addition, we must put forward resources necessary to fix our education, curb government waste and provide a platform to make our economy more vibrant and dynamic so that it works for all.

Yes, austerity is a good thing when times are tough, but one would be disingenuous to pretend that it is not going to come with a hefty price, especially on the growth front.

That price is the news that Gordhan gave us on the country’s growth outlook. He slashed the 2012 growth forecast for a second time in four months to 2.7 percent, down from the 3.4 percent he had projected in October. What this means is that we are nowhere near the 7 percent growth that the country needs to mop up the millions of unemployed, especially youth.

The Treasury’s estimate that our economy will probably add 850 000 jobs over the next three years is cold comfort. At that pace the unemployment rate will fall to 23 percent in 2014. Growth being as anaemic as it is, it is only through some magical powers that we will see President Jacob Zuma’s pledge to reduce the unemployment rate to 14 percent by 2020 materialise.

It is all too easy to say Gordhan is faced with externalities like Greece that we have no real control over, hence the sort of stallspeed growth forecast for 2012.

But it is no secret that we have squandered a lot of good opportunities to put our economy on a sustainable track. So much energy has been expended arguing about the merits and demerits of nationalisation, for example.

What is also quite disconcerting is the prospect that whatever benefit or relief is offered by Gordhan to consumers will merely be wiped out by inflation, which the Treasury forecast to average 6.2 percent this year, above the 5.4 percent estimated in October last year.

All told, what Gordhan presented was a “take” budget not a “give” budget. Except for what is envisaged on the infrastructure front, this is hardly an expansionist Budget.

Granted, we are in much better shape than the likes of Greece but, reading between the lines, Gordhan must be hoping that the global economy gets on the mend pretty quickly, hence his decision to hit the austerity button.

Compared with last year, the tone of his 2012/13 Budget speech was less audacious. Perhaps that is understandable.

Who in their right mind wants to be remembered as having had a rating downgrade occur on their watch?

Many will recall that even President Barack Obama had some real explaining to do when Standard & Poor’s cut the US’S coveted AAA credit rating last August.

I would have liked to see more bold action on boosting growth. The infrastructure spending is vital, but so far it looks like we have staked our future on a one-trick pony.

A thriving economy is a safer bet than reliance on a shrinking tax base to maximise the state’s tax take.