Opposition parties: Mid-term budget impractical and 'too good to be true'

MPs spoke to reporters on the steps of the National Assembly, shortly after Finance Minister Pravin Gordhan tabled the medium term budget policy statement. (David Harrison)

MPs spoke to reporters on the steps of the National Assembly, shortly after Finance Minister Pravin Gordhan tabled the medium term budget policy statement. (David Harrison)

The mid-term budget speech was met with mixed reactions from opposition parties and  on Wednesday.

MPs spoke to reporters on the steps of the National Assembly, shortly after Finance Minister Pravin Gordhan tabled the medium term budget policy statement.

Democratic Alliance MP Tim Harris said the speech was full of reassuring rhetoric, but not nearly bold enough in tackling serious economic problems.

"He speaks a lot about backing the NDP [National Development Plan], but then doesn't table any of the practical measures that the NDP talks about, like active labour market policies, labour reform and removing trade barriers," Harris said.

"Without that action, I don't think we're going to make progress on stimulating growth, and currently we are growing at about 2% and this is half the rate of Turkey, Chile and Malaysia."

This proved that the South African economy was under-performing because of its own domestic problems, and not because of the global economic crisis, Harris claimed.

Harris welcomed Gordhan's announcement that ministers would have to tighten their belts when it came to air travel, car hire, accommodation, catering and entertainment.

ANC reaction
ANC MP and chairperson of Parliament's Standing Committee on Finance Thaba Mufamadi disagreed with the DA's stance.

"Under a very difficult economic environment, the Treasury has been able to walk a very tight rope to achieve fiscal consolidation in the next medium term ... at the same time boosting economic growth, driving investor confidence and ensuring economic and social infrastructure remains a top priority," Mufamadi said.

The announcements on reducing spend on luxuries like credit cards and business class travel was also encouraging.

"In terms of travelling, Parliament should reconsider the travelling costs between Cape Town and Pretoria ...That's an issue we have been avoiding for quite some time." 

Congress of the People MP Nick Koornhof said Gordhan's announcements were "almost too good to be true".

"The finance minister had no choice. He had to reinforce the fiscal framework ... , and I think he did just enough to get the credit rating agencies off our back."

The fact that ministers' spending would be curbed sent a "strong message".

"I hope that investors will relook South Africa a little bit differently after this and come back and invest."

Koornhof expressed concern that the country was not getting any value from the huge amount of money transferred to provinces and municipalities, a sentiment shared by Inkatha Freedom Party leader Mangosuthu Buthelezi.

However, Buthelezi praised Gordhan for being "frank" in his assessment of the problems facing the economy.

"The minister did a very difficult job very well when we were all wondering what sort of financial acrobatics he was going to do," Buthelezi said.

The austerity measures related to ministers gave Buthelezi hope that "at long last we are going in the right direction".

Buthelezi said he was worried that the NDP, which was a "golden thread" running through Gordhan's speech would be done away with.

"The one tripartite alliance partner, which is Cosatu, has rejected this [the NDP]. I don't know to what extent the ruling party is going to look at the votes that they get from Cosatu in making decisions on the NDP."

Federation of Unions of South Africa (Fedusa) general secretary Dennis George said the projection of a 2.1% growth rate was too low to create a dent in unemployment.

"Unemployment is going to remain a problem even if government implements the incentives they announced," he said.

The slashing of perks for ministers and mayors was "long overdue".

"Some of these ministers have been living like kings ... They were spending money flying business class on overseas trips, taking boyfriends with them," George said.

He questioned whether Gordhan's promise would be fulfilled.

"Talk is one thing.
Implementation is another thing."

South African Communist Party (SACP) general secretary Blade Nzimande said Gordhan had said all the right things, especially when it came to the government spending wisely and saving to ensure more money went to development.

Nzimande was in the news in 2009 for using public funds to buy a R1-million BMW while he was minister of higher education and training.

"We also welcome the commitment by the minister to look holistically at this, which is actually the single biggest expense, travelling up and down between Cape Town and Pretoria," Nzimande said.

South African National Civic Organisation (Sanco) deputy president Lemias Mashile said Gordhan's commitment to cut wasteage would find favour with poor South Africans.

"We believe as a civic movement that step will actually make a lot of resources ... to be directed to service delivery and probably would lead to less protest marches because more services will be provided using these funds that have been used for entertainment, for travelling and for other things that have got nothing to do with service delivery," Mashile said.

The African Christian Democratic Party broadly supported Gordhan's mid-term budget speech.

"Our fiscal consolidation path is on track and that is important because that will address our debt levels," said ACDP MP Steve Swart.

"The minister aligned the budget framework with the NDP, basically telling the trade unions we are going ahead with this plan ... It's something that must be implemented to create jobs and address poverty."

Freedom Front Plus leader Pieter Mulder said the mining sector strikes had cost the government and had led to "alarm bells going off".

"There's not enough money any more. Now he [Gordhan] comes with all these government discipline measures, which I really think should have been done 20 years ago," Mulder said.

"I'm a deputy minister [of Agriculture] and I don't have a credit card, I don't use ministerial accommodation ... It will only be peanuts that will be saved, but I do agree with this message being sent out as a symbol."

Business Unity South Africa (Busa) welcomed the budget's re-affirmation of the government's commitment to the NDP.

"Certainty and predictability in the policy environment remains essential for business and investor confidence," special adviser Prof Raymond Parsons said in a statement.

"Busa sees the mid-term budget speech as a realistic and balanced assessment of South Africa's economic prospects and challenges." Parsons said the organisation was reassured by how the medium-term budget policy statement dealt with government spending and public debt management.

This created an improved fiscal basis for the future, he said. However, Busa was concerned that the already sluggish growth rate of 2.1% was expected to rise to only 3.5% by 2016.

This was inadequate to reduce unemployment, inequality, and poverty. Parsons said Busa supported Gordhan's call for greater co-operation between labour, business and the government. 

The medium-term budget is based on an unsustainable model of deficit spending, mounting government debt and onerous taxation, trade union Solidarity said.

Gordhan's policy statement fell short of sufficiently curbing the growth of the country's welfare state, Solidarity Research Institute senior economics researcher Piet le Roux said in a statement.

"It is disheartening to hear Gordhan outline plans for continued expenditure on the so-called social wage that taxpayers have already realised long ago is wasteful and does not sustainably improve living standards in South Africa."

Le Roux pointed to the fragility of the country's national debt situation. Government debt had been rising over the past 10 years, particularly in the past four years.

"It now totals R1.6-trillion, not including direct government debt guarantees for financially unsound organisations like Sanral, Transnet, South African Airways and Eskom," he said.

"While the current environment of unusually low interest rates means that the government debt service cost, as a percentage of government revenue, is currently only 10%, there is in fact a significant risk in the event of any normalisation of interest rates."

If interest rates returned to the same levels as a decade ago, government debt service cost, as percentage of government revenue, could rise to about 17%. 

This would be tough to bear and would hurt the economy in the form of higher taxes or higher inflation, said Le Roux. Solidarity said it was disappointed that Gordhan had not engaged the union on its proposal earlier this year for tax rebates for expenditure relating to personal security.

"Solidarity remains convinced that taxpayers should be given relief from what appears to be an ever-increasing tax bill," the union said. – Sapa

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