/ 25 February 2016

More of the same budget talk takes SA economy nowhere

More Of The Same Budget Talk Takes Sa Economy Nowhere


Finance Minister Pravin Gordhan, in his attempt to please everyone, decided it’s best not to rock the boat and stick to what he knows best: say nothing, change nothing.

South Africa needs an overhaul of macroeconomic policy and state restructuring, in particular of the state and state-owned entities.

Until it deals with the following issues in the medium term, the minister’s budget speech, like his last in 2014, is going to leave South Africa in the same economic situation it is in now next year, if not worse:

  • The government must abolish tenders and build state capacity to manage limited resources and deliver services. The often referred to ballooning public-sector wage bill alone is not a problem but, because the government relies on third-party service providers to deliver the majority of services, these are performed at an exorbitant cost.
  • Before the Economic Freedom Fighters arrived in Parliament, there was no or very little mention of illicit financial flows. Because of EFF persistence on the matter, to everyone’s irritation, the issue of illicit financial flows is now on top of the fifth democratic Parliament’s agenda and that of government as a whole. What is of concern is the reactionary approach by the minister, who is still waiting for solutions from the Organisation of Economic Co-operation and Development, which has admitted that its methods for dealing with illicit financial flows have failed. Parliament must pass an Act that makes tax avoidance illegal, with heavy penalties, which includes the expropriation of company assets and jail terms for directors.
  • Former finance minister Nhlanhla Nene presented the last medium-term budget policy statement in the National Assembly, but he failed to recognise the students protesting outside and did not say much about the funding crisis facing institutions of higher learning. Gordhan has also failed to recognise the prevailing protests and has allocated only an additional R16.3-billion, of which only R8.2-billion will have immediate effect. But South Africa cannot postpone free quality education for all.
  • In placing undue importance on domestic and international investors, the minister’s budget failed to recognise that South Africa will not industrialise without the state playing an active leading role in the economy, and state-owned entities are at the centre of state-led industrialisation. Call it minority ownership now but, like Sasol, and many other former state-owned entities, South Africans will wake up one day to find them in the hands of a few.

For everyone else, in particular millions of young, unemployed, hungry and destitute people desperately looking for a sign that tomorrow there might be a job because the economy is improving, it is not the budget speech they hoped for. The minister had other matters on his mind and South Africans’ struggles will continue.

Gumani Tshimomola is a senior researcher for the EFF’s parliamentary caucus.