Budget firm against poor management and corruption
DESPITE delivering his budget under difficult economic conditions, Finance Minister Tito Mboweni showed heart, but remained firm against mismanagement and corruption.
This is according to University of Zululand economist, Prof Irrshad Kaseeram, who said the budget might just succeed in staving off a ratings downgrade.
‘The budget deficit is expected to widen to 6.8% over the next 12 months, which is the highest since the dawn of democracy.
‘However, in order to ensure fiscal sustainability over the long term, the major announcement by Mboweni is that the government wage bill will be reduced by more than R160-billion over the next three years.
‘Hopefully rating agencies will now be appeased, as they flagged the huge government wage bill, which accounts for 35% of total government spending, as a main risk to unsustainable public debt.
‘This is a bold move by government to address the concerns of rating agencies, but they will have to brace themselves for the wrath of the Congress of South African Trade Unions (COSATU),’ said Prof Kaseeram.
He commended the establishment of a South African Sovereign Wealth Fund through the sale of broadband spectrum, oil and gas and other mining royalties.
‘According to the minister the fund ‘will serve as a saving and investment tool for future generations’ and will contribute to assisting with government spending.
‘However, it must be pointed out that countries such as Norway and Sweden only set up their sovereign wealth funds when they were experiencing budget surpluses. It is believed that the funds could be used to bring down the government debt levels.
‘In my opinion a wealth fund was meant to serve the sole purpose of boosting the fiscus in times of need,’ he said.
The budget also presented some good news for consumers as no Value Added Tax (VAT) increase was announced and personal income tax relief was outlined.
‘If one earns R10
000 a month, the relief is approximately 10% per annum, while if one earns R100 000 a month the gain is 1%. In both cases taxpayers will have an extra R1 000 per year to spend. This is the essence of progressive tax.
‘Moreover, government will be looking to reduce the corporate tax rate which is presently at 28% to make our companies more attractive, and to attract new firms to set up shop here,’ Kaseeram said.