Gordhan’s budget speech ‘predictable, ‘not surprising’, say economists

Gordhan talked about radical economic transformation, which must be based 'on sound economic and constitutional principles'.

FILE PHOTO: Minister Pravin Gordhan. Photo: GCIS

Although Finance Minister Pravin Gordhan’s budget speech this year was predictable, he sent a clear message that radical economic transformation must be based on “sound economic constitutional principles”, according to experts.

Gordhan, who tabled the budget in the National Assembly on Wednesday, reminded South Africans of the words in the Freedom Charter, that “South Africa belongs to all who live in it”.

“We face immense transformation challenges – we must overcome the inequalities and divisions of our society. All South Africans must share in a more prosperous future,” he said.

“In drafting our constitution, this was a central foundational principle, and so the values of freedom, dignity and equality are embedded in our law and our policy.

“This is also why our constitution requires that all who live in our country should have access to housing, medical care, social security, water and education.

“There should be a progressive realisation of access to tertiary education and other elements in a comprehensive set of social entitlements. Wealth and economic opportunities must be equitably shared.”

These commitments impose obligations on government and have implications for the business sector and all stakeholders, said Gordhan.

“We have a shared responsibility to address the social and economic challenges before us.”

According to Kenneth Creamer, economist at Wits University, the minister understood that “policies not based on sound economic and constitutional principles will be doomed to failure”.

“Given South Africa’s ongoing problem of economic and social exclusion, Gordhan seeks to use the budget to ensure that economic transformation programmes have the widest possible impact and touch the lives of millions of poor South Africans, and do not just enrich a few,” he said.

“He reminded South Africa that about two-thirds of the budget each year – that is in this year’s budget about R1 trillion out of R1.5 trillion total expenditure – is used for the realisation of social rights.

“It is also hoped that the problems that have plagued the higher education sector for the past few years will now be well on the way to being resolved, as government has allocated considerable additional resources to this sector.”

Economist Azar Jammine added there weren’t any surprises in the budget.

“We knew Gorhan would talk about transformation. But there was no way there was going to be a sudden change.

“He stuck to fiscal consolidation, which is needed to avoid a credit rating downgrade.

“But to support that, he had to raise taxes.”

Gordhan introduced a new top personal income tax of 45% for those with taxable incomes above R1.5 million.

“Those who earn more, pay more,” Gordhan said.

Jammine said while this was fairly heavy on upper income groups, it only meant that the rich saved less.

University of Johannesburg associate professor of economics Nicholas Ngepah said Gordhan had avoided taxation on the poor and consumers for their lives to be made bearable.

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