Finance Minister Pravin Gordhan presented an optimistic vision for the future despite warning that the National Treasury has to be careful about budget allocations going forward and will have to work with less money for government to play with. Gordhan, flanked by his national treasury director general Lungisa Fuzile and his deputy finance minister Mcebisi Jonas said good leaders had to stand up – among the business, government and labour sectors – in South Africa. BizNews correspondent and Cape Messenger Editor Donwald Pressly penned the below report on the press briefing held during the Medium Term Budget Policy Statement lockup this morning.
By Donwald Pressly*
One of the questions from the floor got to the nub of the issue, wouldn’t investors – and rating agency honchos – look at the reduced projected revenue figures and take a negative outlook at the South African nation state going forward.
The finance minister, who refused to take questions about his prosecution for trumped up fraud charges by the National Prosecuting Authority saying that he would answer questions about that next week when he appeared in court, seem positively emboldened by the question.
“We have to make sure that those forces in our society that want inclusive growth… so no one is left behind … are the leaders of this process,” he said.
Sweeping away questions about political interferences in National Treasury’s work, Gordhan said: “there will be distractions”.
He said that he was relying on the good people in the country – the majority – who wanted to “commit their shoulders to the (economic) wheel”.
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Following on a point made by Jonas that the non-government sector would be the engine of economic growth and new jobs going forward, Gordhan said simply: “We want more competition, more enterprises … in particular for the black majority at the end of the day. If our institutions continue to strengthen we can start generating the right kind of (inclusive) growth.”
Good leaders, both from government, the private sector and the labour movement needed to head the mission to achieve this inclusive growth, the finance minister argued.
He said the planning for the medium term had been based on “a measured balanced and careful approach to fiscal consolidation”, but he warned that government could not achieve great things on its own. “Government can’t do it alone,” he said.
Significantly it was Jonas who was the most outspoken about political interference in treasury, although he did not call it that. He said there needed to be better management of “our politics”. Bad politics had an impact on the economy and growth, he said. “Any sign of political noise is likely to have a negative impact on growth.” It was a clear reference to the ongoing squabble that Treasury is having with the Gupta family, but the family was not mentioned once throughout the lockup press conference.
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What emerged at the press conference was that there is a concern about the growing national debt. National Treasury director general Lungisa Fuzile was asked if there a “target” – a threshold – for national debt-to-GDP . “Can you afford the debt you have now and in the future,” Fuzile asked. Given that national debt had risen from about 44% percent of GDP to nearly 49% of GDP since the beginning of the year, this was a poignant question.
Fuzile answered that it was “time for South Africa’s debt to stabilise (to) stop rising as a percentage of GDP. (But) over the next while (so we) can be comfortable that we have a better handle and control over our debt. In the numbers we do show that we are making good progress towards stabilising debt. We would have liked to have reached this long a time ago.
The Medium Term Budget Policy Statement said South Africa’s current circumstances raise the possibility of a low-growth trap. “In this scenario, government, facing the need to stabilise national debt, introduces consolidation measures that ultimately prove self defeating,” it stated. “A tigheter fiscal position reduces GDP growth, leading to lower revenue and higher deficits. This creates a dilemma. Aggressive fiscal consolidation may bolster investor and business confidence, but will likely add to the difficulties facing the economy.”
Taking no remedial action, however, “may result in a ratings downgrade, higher interest rates and capital outflows, which could precipitate a recession”, the MTBPS warned.
Referring to the threat of downgrades by rating agencies, Gordhan said it was all about making “the right choices”. It was about “surviving the next two years or so… (we need to do) what needs to be done.”
He explained that “measured consolidation” was the key. Fiscal policy aimed to deliver a measured consolidation that – as the MTBPS document states- “that avoids a sharp contraction in expenditure, continues to prioritise capital investment, and stabilises national debt as a share of GDP. This will lay the foundation for more rapid economic growth in the years ahead.
A flurry of questions were put to Gordhan and Fuzile about the announcement that there would be new tax raising measures in the February 2017 budget, but he stopped the questions short. “We don’t discuss tax choices in the (MTBPS) documents, we don’t intend to answer any of your questions (now),” said Gordhan. He joked that the journalist asking the question had been around the fiscal block many times and he should know that tax questions were not reported on in the MTBPS.
Reacting the national higher education crisis at university campuses – Higher Education Minister Blade Nzimande joined the lockup press conference later – Gordhan warned that using violence to achieve certain aims – a reference to Fees Must Fall – was not the answer. “Those who believe that violence is the answer … this is not a government that is not listening or engaging (with protesting students).”
People with the correct solutions are those who should come together and become a dominant voice on education solutions in South Africa.
It was announced that universities and students “will receive an additional R17 billion over the medium term”. Post-school education and training budget were reported to be the fastest growing, with university subsidies increasing by 10.9 percent each year on average and the NSFAS allocations growing by 18.5%.
- Donwald Pressly is editor of Cape Messenger,
