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Steering a middle courseFinance Minister Pravin Gordhan yesterday delivered his first Medium-Term Budget Policy Statement (MTBPS). Politically, Gordhan seemed to be steering a neutral course on the surface. However, while making some concession to the Left and promising more space for debate and revision of policy, Gordhan also showed a degree of irritation towards labour, writes Stef Terblance from Africa-International Communications.
On the other hand, while he reserved implied praise for much of what his predecessor, Minister Trevor Manuel, had done during his tenure at the Treasury, and while he touched on the need for consistency, he at the same time gave notice of structural and policy changes that may be in the pipeline.
Most political parties reacted positively to Gordhan’s first budget, congratulating him on a positive budget and saying he had passed his first test as finance minister. Economists reacted more cautiously, pointing out the good and the bad. Although of the latter, they seem not to have found too much in his statement.
This MTBPS, as Gordhan points out, is set within the parameters of the Jacob Zuma government’s five priorities – creating jobs, improving health outcomes, enhancing quality education, rural development, and fighting crime and corruption – and provides the fiscal framework for attainment of these priority goals.
As was to be expected, the global economic crisis and its impact on South Africa largely influenced the content of Gordhan’s first MTBPS, which showed that the impact of the crisis on the country had been much more severe than had generally been thought previously.
And while he did refer to signs of recovery, he did point to uncertainty over its pace and sustainability, as we had predicted. Gordhan hinted that more structural challenges in the economy had to be overcome through sustained, broad-based transformation going much beyond the present crisis and recovery.
On the surface, Gordhan seems to have been largely unfazed by the Left-centre debate happening in the ruling African National Congress (ANC), taking charge, facing realities and producing a budget that is businesslike and politically mostly neutral. Both sides of the debate are likely to issue both praise and criticism.
Gordhan took the neutral route when he promised policy consistency while leaving the door open for the Left by also promising “room for engagement and review”.
Further on in his speech he returned to this tricky terrain when, within in the context of how the government should respond to a variety of current global and domestic challenges, he said: “We should expect to find that some parts of our present policy framework are sound and should be reinforced. Others need to be dismantled and overhauled. We need to pursue options through a dialogue that respects a diversity of views and a plurality of methodologies.”
While Gordhan did respond accommodatingly to some left-wing demands, there are also clear signs of confrontation with labour over recent wage increase excesses.
Gordhan departed from his predecessor’s approach in placing more emphasis on trade and industrial policy than had been the case previously. This will bolster the input and influence of the Trade and Industry and Economic Development ministries, both being controlled by the Left under ministers Rob Davies and Ebrahim Patel respectively.
This is to lead to a strengthening of support labour-intensive industrial programmes and adjusting tariffs to suit South Africa’s vision for industrial policy development.
And while he rather ambiguously said expansionary fiscal and monetary policies should be maintained “only as long as is necessary” – opening a door that may not easily be closed again – he hinted at a possible tax increase and the need for more co-ordination to deal with the current volatility and lack of competitiveness of the rand, both of which have been fingered as constraints by the Congress of South African Trade Unions (Cosatu) and the South African Communist Party (SACP).
But in what could be seen as implied praise for his conservative predecessor and an undertaking to continue at least partially along the same trajectory, Gordhan said while other countries had to cut back spending, South Africa could continue its investment plans because it had entered the economic downturn with a budget surplus and a healthy fiscal position.
Encouragingly, Gordhan strongly emphasised throughout the policy statement that the government would work hard towards achieving improved, better managed, focused and prioritised delivery and development; will pursue better management of public funds with an emphasis on savings in all departments and levels of government; and that the government would come down hard on corruption, end wastage and clean up the corrupt state procurement system.
Perhaps Gordhan had some of his big-spending colleagues in mind when he warned that “we cannot spend money on wasteful extravagances and golf days, we cannot tolerate unnecessary bureaucratic structures, and we must achieve greater value for money in contracting for goods and services.”
Gordhan also placed the anticipated emphasis on job creation linked closely to the government’s rural development strategy, on social services, local infrastructure programmes, new approaches to skills development, poverty reduction, and on attention being given to problems in education.
He promised that implementation of initiatives in response to the global crisis initiatives developed earlier this year under the guidance of Deputy President Kgalema Motlanthe and facilitated by the National Economic Development and Labour Council (Nedlac), would – co-ordinated by Economic Development Minister Ebrahim Patel – gain impetus as part of a deeper and sustained economic development strategy.
Gordhan also drew attention to the need for exploring new options for promoting the development of the mining industry, lowering costs in telecommunications and transport (both of which have been recent battlegrounds between sectors of business and the government), expanding tourism, enhancing technology and developing further trade opportunities.
Other highlights include Gordhan’s commitment that the government would look carefully at borrowing to fund its spending. (However, this is now out of necessity and not because the Left has for years been urging the government to use its surplus to increase social spending).
The 'mini budget' also showed that Gordhan, perhaps with a hint of irritation, was forced to pick up the tab on behalf of the state’s rotten apples regarding items such as the R1-billion rand assistance to the Land Bank, the R200-million transfer to the troubled South African Broadcasting Corporation, and R192m for a deal gone bad with Airbus for military aircraft.
Finally, Gordhan also had to foot the bill for President Zuma’s restructured and heavily swollen Cabinet by forking out R589m for new government departments. But he seemed to justify this on Zuma’s behalf by stating it was necessary for a better co-ordinated effort to attain the government’s five priority and other delivery goals.
