Gordhan’s budget speech a challenging balancing act – analysts

Analysts say Gordhan will have to balance calls for radical economic transformation with fiscal consolidation at his upcoming speech.

As the country awaits Finance Minister Pravin Gordhan’s Budget Speech on Wednesday said to be “under a cloud of state capture” – the question remains as to whether any emphasis will be placed on radical economic transformation.

This, as the ANC organises itself under a theme for radical economic transformation, as highlighted by President Jacob Zuma in his state of the nation address (Sona) earlier this month.

According to analysts in this regard, Gordhan faces a challenging “balancing act”.

“Going back to the Sona earlier this month … Zuma spoke at length about radical economic transformation. While this is likely to be a key theme in the 2017 National Budget – it is important to note transformation of any kind takes time,” said Novare economic strategist Tumisho Grater.

“…It is safe to say that balancing economic transformation, social responsibilities and ensuring that South Africa is on a path of fiscal consolidation will be a difficult balancing act for the minister.”

According to economist Azar Jammine, all Gordhan could do was press ahead on the issue of fiscal consolidation and commit himself to continue on the path he has.

“The budget will also be under a cloud of state capture and the meaning of (former Eskom CEO) Brian Molefe’s appointment as an MP,” said Jammine.

“Allocation-wise there is the theme of the ANC for radical economic transformation. So he will be concentrating on social expenditure. There will be a difference in the talk and practically carrying on with the same kind of trends,” he predicted.

“A lot of focus will be on whether he will get his R28 billion to raise taxes on.”

UJ associate professor of economics Nicholas Ngepah echoed that there was a need for Gordhan to balance radical economic transformation in trying to allow for the economy to stabilise.

“One of the key issues … is the call for radical economic transformation. But in 20 years after democracy, land distribution is stagnant,” said Ngepah.

“So this would be a shock to economy. Economies don’t like shocks – it is difficult to deal with an economic shock, good or bad.”

He added that the new radical approach was an important call and long overdue.

“It’s overdue, but implementation could be a problem for the South African economy – we have spent 20 years not doing that. Government should have tackled it, and by now we would have been in the final stages.

“It might happen too abruptly, but the finance minister is pragmatic and knows this well – he is likely to maintain a levelled decision.”

Political analyst Daniel Silke said while Gordhan was likely to make reference to the need for economic transformation, it was the figures that are going to matter rather than big policy issues.

“The rhetoric from the ANC is on transformation – which you can have if the pie is big enough for all to enjoy. One must create a bigger pie and you can do this.

“Unless you have good economic growth and a credible state you can’t talk about it coming from the state.

“It’s nice in theory – but only if democracy and transparency are under control. He is likely to make reference to the need for economic change, but is likely going to show ways to grow the economy. He will talk about about creating a more capable state.”

His budget is a case “where he is going to be seen in a caretaker role on credible coherence”, Silke said.

Politically, this is a budget where Gordhan will present as a government minister from one faction within the ANC, he added.

“It will be very different from what other parts of the ANC would like to see.”

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