/ 16 February 2010

All eyes on Gordhan ahead of budget speech

The government should maintain taxation at current levels, the Banking Association of South Africa said on Tuesday as it presented its pre-budget wish list.

2010 Budget Special Report

Banking Association SA managing director, Cas Coovadia, said any increase in taxation rates — for either corporate or individuals — would dampen corporate investment and responsible consumer spending.

“Government should rather continue to broaden its tax base and improve collections while retaining current tax levels to encourage growth,” Coovadia said ahead of Finance Minister Pravin Gordhan’s first budget speech on Wednesday.

Coovadia said while the country was beginning to ermerge from recession, the jury was still out on the pace of economic recovery.

Stimulate growth, build capacity
“It is important in this environment for government to stimulate growth and build its capacity to implement its programme. It is also important for business to work constructively, although robustly, with government to explore how business expertise and capacity can be brought to bear to improve government capacity, thus combining to improve the socioeconomic conditions of people in our country,” Coovadia said.

He said the government also needed to efficiently use its existing resources and ensure there was accountability and efficiency in the deployment of resources.

“There has to be a creative collaboration between the private sector and government in order to leverage off the private-sector capacity through incentivisation.”

Coovadia said the banking industry also hoped that capacity would be developed in municipalities to deliver basic services to their communities and facilitate the development of infrastructure.

“For example, in housing, the inability of municipalities to expeditiously provide bulk infrastructure and land titling has resulted in developers exiting affordable housing market. Government needs to ensure consistent delivery of services by ensuring there are strong accountability mechanisms to ensure resources are always optimally utilised,” Coovadia said.

Limited resources
He said South Africa needed to cut its clothes to fit its cloth because its resources were limited.

“Instead of looking at new programmes that cost a lot of money, government needs to optimise performance on existing identified programmes, especially in the vital areas of health, crime, jobs and education.”

He said the government needed to get the basics right instead of looking at other embellishments and focus on key areas of service delivery through efficiency and accountability mechanisms.

“Government needs to grow and build upon the country’s legacy of responsible fiscal management to ensure that punitive sanctions are applied on those who misuse public funds,” he said.

The time had come for the government to fulfil its mandate to citizens by strongly governing and taking the necessary decisions to show decisive leadership, Coovadia said.

The budget speech “should both reflect that mandate and address all the areas mentioned above as matter of urgency”.

Uncertain future
Meanwhile, trade union Solidarity said Gordhan must assure the business community of a stable environment.

Spokesperson Jaco Kleynhans said the government had to give businesses the assurance of a stable environment “to ensure that production in the economy can be increased faster and employment can improve”.

Gordhan should clearly explain in his speech in Cape Town how the government would create an environment that encouraged economic growth and job creation, the union said in a statement.

“Solidarity is especially concerned about the country’s poor exports, low consumer spending and the uncertainty about input costs such as electricity, which are currently preventing businesses from growing.”

Slow recovery in labour market
Kleynhans said the country was currently seeing a very slow recovery in the labour market with almost no permanent jobs being created in the private sector.

“The reason for this is that businesses are uncertain about the future, especially with electricity tariffs that could rise sharply in the near future and consumer spending that is still very low.”

Last week Solidarity expressed its disappointment with President Jacob Zuma’s decision to say almost nothing about Eskom in his State of the Nation address.

“We hope that the minister will announce a clear plan regarding how the government will help Eskom to go ahead with its expansion plans without huge tariff hikes.

“The government has so far this year been quiet about the Eskom tariff increases, while South Africans in general are very worried about the issue,” Kleynhans said.

The trade union would like to see this year’s budget forming the foundation for a strong economic recovery.

“With hundreds of thousands of permanent jobs that were lost last year, the government must now take the right steps to support consumers, help businesses expand and improve exports.”

Solidarity said the best way for government to combat unemployment and poverty was by helping the private sector to grow faster, which would automatically lead to the creation of quality jobs and better government income.

“The biggest mistake that the government can now make is making life difficult for consumers and businesses through taxes and tariffs and increased regulation,” Kleynhans added. – Sapa