Budget 2014: Gordhan dangles carrots for voters

Will the "good news" that Finance Minister Pravin ­Gordhan delivered this week have an impact on the May 7 polls?

He did make some attempts to appease voters, providing R9.3-billion in income tax relief to households and personal income tax relief of R2.5-billion. About 40% of the tax relief goes to South Africans earning below R250 000 a year, Gordhan announced.

"The ANC receives most of its votes from the rural poor and most of them fall in this bracket of R250 000 or less," said political analyst Ralph Mathekga, adding that the R250 000 bracket would include some of the middle class.

"The ANC also didn't want to upset the middle class because these are opinion-makers, the intelligent group of voters."

Gordhan offered an increase in the tax-free lump sum amount paid out of retirement funds from R315 000 to R500 000. "This will especially benefit lower-income members who did not benefit from deductible contributions," the minister explained.

Retirement plans
He revealed that talks would be held with the National Economic and Development Labour Council on measures to cover the six million employed South Africans who do not enjoy access to employer-sponsored retirement plans. To encourage household savings, the state promised to introduce legislation to allow for tax-exempt savings accounts.

Helping the highly indebted could be one of the most welcome announcements in the budget. South Africa is struggling to manage the reckless lending that has left many unable to afford their lifestyles.

Gordhan said the Cabinet has approved measures to help households to reduce their debt burden and to "stamp out abusive and fraudulent activities of reckless lenders and unscrupulous debt collectors".

This would bring hope to millions of highly indebted citizens across all class brackets who, according to Mathekga, could make up around half of all employed South Africans. "Out of every rand earned in the country, 60 cents go to servicing debt, which means there's less disposable cash. Others borrow more to service an original debt."

Mathekga gave an example of Marikana mineworkers who were so indebted that some of them took almost nothing home in wages, thereby incurring debts that "create social instability".

Malema threat
"A nation that doesn't have disposable income will listen to [Economic Freedom Front party leader (EFF)] Julius Malema. They want to hear someone saying 'this whole system is flawed' because that gives them hope of things changing for the better. The ANC is worried that it's the party's own constituency that listens to Malema."

The EFF has promised to nationalise private banks and create a 100% state-owned bank.

Mathekga said the large numbers of overly indebted citizens created "a political nightmare" for the ruling party.

Bu the analyst also said Gordhan had managed to walk a tightrope between electioneering and delivering a realistic budget that would please the markets as well.

"If the ANC didn't care about the markets they would have gone all out because it's election year, but the party has been much more careful about upsetting the markets."

Difficult situation
Mathekga said the ANC was in a difficult situation politically, regarding government spending.

"The problem is that you've been ruling for 20 years, you know the challenges of being in government with an unfriendly economic climate, but now you're faced with populism politics from the opposition."

Political analyst Tinyiko Maluleke said the budget was extremely cautious. "Even by Pravin's standards it's a very muted budget that is neither too sharp nor too blunt."

The budget was safe because the poor, middle class and investors all received something, he said.

"They might not be too elated, but they won't be upset. In an election year you don't want the economy to become an even more contested issue than it already is."

The economy was central to almost all party manifestos that have been launched.

Maluleke also said he thought it was "a typical end-of-term budget".

"He sent a message that ‘I'm a minister of finance for an administration whose term is coming to an end and I don't want to be setting too many targets for whoever might be coming in after elections'. It's a budget of an outgoing minister by virtue of the term ending."

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Mmanaledi Mataboge
Guest Author

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