Tough balancing act

The 2016 National Budget was tabled under a difficult global economic environment, with South Africa experiencing low economic growth, Finance Minister Pravin Gordhan said on Thursday.

Responding to a question at a post-budget briefing, Minister Gordhan said economic conditions are tough.

“It’s a tough budget. We are finding ourselves in a very difficult global economic environment with lots of doubt on whether the developed world will continue to grow� We’ve seen that currencies of emerging markets have been affected and commodity producers have been affected,” he said.

The budget, tabled in Parliament on Wednesday, comes at a time when the country is faced with high unemployment levels and slow growth.

“We have our own internal difficulties as South Africa. We’ve been growing too slowly. Our unemployment levels are too high, poverty and inequality levels are also high… Government has, for the last six years or so, been carrying the substantial burden of investing in infrastructure, for example,” he said.

He said the country needs to now come up with new answers.

“At the same time, we’ve borrowed a lot since 2009 in order to sustain, in particular, our social services and invest in infrastructure and the economy more generally. We haven’t grown at the same level as we borrowed,” said Minister Gordhan.

This, he said, means South Africa has to tighten its purse strings.

“This means we have to tighten our belts, tax a little bit more without hurting the economy and cut expenditure within government as well. That’s the balancing act temporarily. I hope that we have to perform it until all of us can put our heads together and say, how do we grow this economy, how do we get more investment, how do we create more jobs?”

The 2016 Budget also made tax proposals that include a personal income tax relief of R5.5 billion, which partially compensates for inflation, focused mainly on lower- and middle-income earners.

In his comments on this, Minister Gordhan said South Africa’s household debt is quite high.

“Indebtedness in South Africa is a serious problem. Unsecured lending at one stage was a serious problem. The message is, we will try to do whatever we can as we have done this time. Where there are possibilities of tax relief, we will direct the tax relief at the lower end [of the income bracket]. For example, to mitigate inflation, the money that we’ve put in (R 5.5 billion) is going to lower income brackets,” he said.

The Minister further urged South Africans not to overextend themselves financially. “Like government, everybody needs to balance their budgets as well until we can get the economy to start growing.”

Nuclear build

On the nuclear build programme, the Minister reemphasised the budget stance that nuclear will be expanded at a scale and pace that is affordable following a thorough and transparent tender process.

“We are at the very early stages of the programme. We will phase in the implementation of a programme like that in accordance with our affordability. We have to go through a proper, transparent procurement process. It’s going to be a year or two or more before we can say, how long, how much and over what period of time we are going to manage this programme,” he said.

Minister Gordhan also spoke of the need for investment in order to grow the economy.

“For the purposes of growth, we require more investment both from government and from the private sector. We need more creative energy from our own people, we need entrepreneurs on a large scale and support for small, medium and micro-sized enterprises (SMMEs).”

Meanwhile, Deputy Minister Mcebisi Jonas spoke of the importance of transparency in the procurement process saying this is critical for success.

Adding on the Deputy Minister’s comments, Minister Gordhan said change is needed.

“We need to change the business culture. We should go back to basics,” said the Minister.