So cautious was this week’s budget that the finance=20 minister has been dubbed the Kepler Wessels of finance=20 ministers, writes Reg Rumney
It could be described as a Banker’s Budget, cautious=20 and conservative to a fault. Indeed, one humourist this=20 week described Chris Liebenberg as the Kepler Wessels=20 of finance ministers.
To be fair to Liebenberg, the tightrope on which he had=20 to walk in presenting the first Budget of national=20 unity was higher than usual. On examination, it is more=20 redistributive of wealth than it may first appear:=20 along with a higher top tax rate comes the start of a=20 new thrust against evasion, which only the wealthier=20 have the resources to practise.
The Budget also had to concern itself with complex and=20 unglamorous matters, such as the inclusion of the old=20 homeland territories within a unitary tax structure. It=20 also does much tinkering with many minor technical tax=20 matters, such as dealing with the second-car tax perk.
That the focus of the Budget is the deficit before=20 borrowing rather than a wealth tax, or some other=20 unspeakable horror, speaks volumes about the newfound=20 conservativism of the ANC members of the government of=20 national unity. And that the Budget was something of an=20 anti-climax is partly due to the following factors:
* The Joint Standing Committee on Finance sent back=20 for reconsideration key proposals, like the capping of=20 the tax-deductibility of pension and retirement annuity=20
* Leaks to the market about many of the Budget’s=20 broader aspects, possibly because of the wider process=20 of transparency through which the Budget was put=20 together this year.
* The Budget was overshadowed by the abolition of the=20 financial rand, the dual currency system that=20 sterilised capital outflows since 1985.
This is not to suggest that the outside world is=20 waiting with bated breath for the Budget. Certainly,=20 the scrapping of the financial rand was not headline=20 news overseas. It came close to being the non-event the=20 authorities had hoped it to be.
The Budget is also in a way a non-event for the world=20 at large in that it did not introduce any measures=20 which would be unpopular with local or foreign=20
Yet the scrapping of the financial rand and prospects=20 of much higher economic growth this calendar year had=20 led to high hopes of a much-reduced Budget deficit as a=20 signal to foreign investors.
The deficit — expressed as a percentage of gross=20 domestic product, the total value of the output of=20 goods and services during a period — is expected to be=20 5,8 percent. This is lower than it might have been, but=20 a market rumour before the Budget that it would be 5,1=20 percent showed the degree of optimism.
Privatisation, only recently coming out of the closet,=20 would have been the strongest signal to foreign=20 investors that South Africa was serious about reform.=20 Moreover, as well as being a mechanism for putting=20 shares into black hands, privatisation could have been=20 used partly to reduce government debt, and partly to=20 cut the deficit before borrowing. Privatisation is=20 usually taken to mean only the sale of large public=20
The sale of state assets is also a handy device to=20 raise extra revenue. And sales from the seemingly=20 endless oil stockpiles garnered a useful R1,2-billion,=20 R600-million of which will be directed to the=20 reconstruction and development programme.
Where, though, was the sale of surplus state land? Only=20 R15-million is projected to be received from the sale=20 of capital equipment and state land, buildings and=20
In his Budget speech Liebenberg did say that task=20 groups had been appointed to co-ordinate a process of=20 selling off of state assets, but gave no further=20
Southern Life economist Sandra Gordon notes that after=20 the Mexico debacle investors will want to invest in=20 emerging markets again, but in those that have embarked=20 on radical restructuring, which South Africa has not=20 done yet. “We will have to be a bit braver,” said=20
Yet one can cast one’s mind back to the previous=20 Finance Minister’s redoubtable panache — and remember=20 the painful five percent transition levy and the=20 curious Secondary Tax on Companies.