Not too hot, not too cold, but just right — that’s the Goldilocks formula, and Trevor Manuel’s 10th anniversary Budget has it down to a nicety. Manuel is no longer a stranger in the house of high finance, testing out the furniture, burning his tongue and irritating the bears.
Indeed, with a rampant stock exchange, consumers who seem to think it is Christmas all year, and economic growth nudging the magic 6%, he has more of a problem with bulls than bears.
If the Budget seemed, on the face of it, to stint a little on tax relief, or on spending growth, with almost no deficit for the current financial year, that is one reason. Running big deficits in boom years is a bad idea, not least because it leaves you little scope to prime the pumps when growth slackens. Of course, if you want to keep interest rates low, you also don’t risk “fiscal dominance” by handing out too much to consumers and forcing the Reserve Bank to break out the whip.
Business, not surprisingly, feels a bit hard done by. If, as Cabinet ministers keep suggesting, the private sector is supposed to “come to the party”, why was there no cut in corporate income tax or the secondary tax on companies (STC)? Manuel will probably never cut STC, which he prefers to call a “witholding- tax on dividends”, and his staff insist that the R7-billion elimination of Regional Services Council levies is equivalent to a 2% cut in company taxes.
In any event, it is not at all clear that tax rates are the primary obstacle to investment in South Africa. Logistical bottlenecks, high input costs and skills shortages are much more urgent constraints. Poverty, misery and political instability don’t help, either.
Attacking those problems costs money, which is one reason the government is taking a bigger chunk of total economic activity as tax revenue than it used to (up from below 25% to nearly 27%). Some economists will fret that that reduces incentives for investment, but the picture may be distorted by the fact that the Treasury still doesn’t trust its own statistics — if gross domestic product is higher than Statistics SA says it is, and growing faster, then you can take proportionately more tax without increasing the burden.
Away from such technical debates, and from Manuel’s incontestably impressive numbers, this Budget hints at some concerns which South Africa was not ready to contemplate in the early years of the growth, employment and redistribution strategy, or even in the initial years of fiscal expansion.
We don’t have adequate skills in the public sector to manage a R372-billion capital investment programme. And unless we get our spending right, the benefits of the current boom will go to waste.
There are wise allocations for increased government capacity in this budget, but it is far from clear that enough is being done — particularly outside the Treasury — to distinguish between investment with real social and economic returns and splurging simply to create the impression of activity.
Will another R580-million for the Pebble Bed Modular Reactor this year produce returns that could not be had more cheaply elsewhere? Will Mbhazima Shilowa’s Gautrain make all of us richer, or just the people building it? We have yet to be shown convincing numbers for either.
And how will the Department of Education convert its share of government spending (nearly a fifth of the budget) into meaningful improvements in the quality of the labour force?
Manuel can’t manage government spending in its entirety, but someone needs to keep an eye on the road and know where the accelerator and brake pedals are.
Mixing politics and law
How does Transvaal Judge President Bernard Ngoepe expect the public to react when he sits on the Bench, in his imposing judicial robes, and then makes a politically based decision to recuse himself from Jacob Zuma’s rape trial? Relativism of this kind, which takes into account the political stature of the accused and does not appear to be rooted in reasonable perceptions of bias, can hardly enhance respect for the judiciary.
The judge’s argument was that Zuma and his supporters would not otherwise accept the judgement of the court. But that is a political problem. His job was to ignore, indeed defy, political pressures in strictly applying the law.
Zuma and his supporters have mistakenly read the ruling as a kind of victory. They conveniently overlook the judge’s implied slur that legal logic is beyond them and that they can be relied on to throw their toys no matter how persuasive the reasoning.
The Zuma camp has loudly and repeatedly demanded a fair hearing which recognises his constitutional right to equal treatment before the law. But in this matter, as throughout the legal process, he appears to have received not equal, but privileged treatment. How many ordinary accused people could force a judge to recuse himself on grounds that they might not like his verdict?
It has been reported that in discussions in the judge’s chambers, Zuma’s legal team also objected to Transvaal Deputy Judge President Jeremiah Shongwe on the flimsy grounds that Zuma had fathered a child with Judge Shongwe’s sister in Swaziland nearly 30 years ago. In how many other cases would legal teams be invited to discuss their view of who might be a suitable trial judge?
A key problem with Judge Ngoepe’s conduct of the matter is that it effectively shrugs off responsibility for what threatens to be South Africa’s toughest post-apartheid trial to more junior judges. If the Zuma camp refuses to recognise his authority, how will colleagues of lesser standing fare?