SARAH BULLEN, Johannesburg | Thursday 10.00am.
FINANCE Minister Trevor Manuel’s appears to be the biggest winner on Thursday after his widely lauded fourth Budget in office, presented to Parliament on Wednesday, has been met with widespread praise from economists, business, unions, and investors alike. His 1999 Budget, commentators said on Thursday, will boost his standing with the international community as a skillful caretaker of the public purse.
The African National Congress’ popular street-activist-turned-economist displayed his characteristic Cheshire cat grin throughout his hour’s speech in which he cracked the whip on government spending, advocating strict fiscal discipline and a commitment to the government’s job creation initiative.
An unexpected boon in the Budget was a cut in company tax rates from 35% to 30% — estimated to unleash a further R2,5-billion into the economy – as well as substantial tax relief for low income earners.
Rand Merchant Bank economist chief Rudolf Gouws said that a substantial cut in the corporate tax rate, a staunch commitment to deficit reduction over the next three years, the budgeting to raise R4-billion from privatisation, the absence of a further increase in taxes on retirement funds, and the promise of further exchange control relaxations, are all positive indications that the government wants to help create a more investment-friendly environment. He echoed many economists in describing as “sensible and “credible,” Manuel’s balance between the competitive goals of an investment-friendly Budget and one which address social backlogs.
BoE Securities economist Klaus Bauknecht pointed out that certain omissions in the Budget will raise some long-term concerns. He said Manuel has not addressed any of the structural weaknesses afflicting the economy and putting a damper on jobs growth, adding that he doubts the cut in corporate tax will have any dramatic impact on formal sector jobs growth. Wine industry co-operative KWV on Thursday deemed the rise in “sin taxes” due to hit the liquor industry as fair — saying that the 5,5% excise duty increase on all categories of wine and the 6,5% increase on brandy compares favourably with the relatively sharp hikes experienced in previous years.
The South African Metalworkers Union hit out at the amount allocated to local government for municipal services. Grants to municipalities which are to be phased out into an equitable share system indicate an abdication of political responsibility by government, Samwu said.
Opposition parties have been predictably scathing about the Budget, deeming it an election Budget. The Inkatha Freedom Party has described it as a “Budget of missed opportunities”, the New National Party as “a damage control Budget”, the Freedom Front as “a typical election year Budget”. Said the Democratic Party’s Ken Andrews: “The beauty of the Budget is only skin deep.”
The country’s largest trade union federation, the Congress of South African Trade Unions (Cosatu), praised the Budget while issuing a call for South African corporations not to use tax cuts merely to increase profits reports e.tv news.
Cosatu instead called on business to use increased revenues to end what it calls an “investment strike”, the reluctance of business to invest domestically.