Finance Minister Pravin Gordhan seems to be widely regarded as a hero, if only because he seems so successful at annoying Jacob Zuma. However, Gordhan’s latest budget is going to clobber ever so many South Africans, particularly those who are better off and not that good at fiddling their taxes.
He has to fill a gaping R28bn hole in the country’s finances, and today’s Budget shows that he is doing this through tax increases – not fully compensating for inflation in a process known as fiscal drag, and by thumping the rich with a new high tax band of 45% on those earning more than R1.5m a year.
The budget tax measures also include the usual hikes in booze and cigarette taxes, an increase in the dividend withholding tax, and hikes in the fuel levy and road accident fund levy.
Work is underway to introduce a new sugar tax later this year, and a Bill for a Carbon Tax will be presented to Parliament later this year.
The manufacturing sector is to be clobbered with a reduction in investment incentives, but more efforts will be made to focus support on black business.
The budget comes as growth is tiny, unemployment is massive, and South Africa is crying out for a boost. Instead this is a budget that will suck wealth out of the system.
Gordhan and his deputy were repeatedly asked during a news briefing about their own futures and whether there would be a wider impact on the Treasury if they were to be sacked, as Jacob Zuma is reported to be planning.
The Minister made the point that it takes a long time to build an institution, and he has worked hard since his return to office to settle the country’s finances and to stave off the ratings agencies. But he concluded that if Zuma boots him out, that’s it. There is no appeal.
He suggested that overnight an institution can be messed up, and issued a vague warning that his ousting could bugger things up at the Treasury. And he warned that patronage and kleptocracy are two diseases which we don’t need in SA – a clear reference to those believed to be pulling Jacob Zuma’s strings, and maybe even to the President himself.
To his credit, Pravin has not produced a lame duck budget, even though he may be turning into a lame duck minister.
It is a tough budget, and keeps the country’s finances from falling off a cliff.
However, this is not a budget for boosting growth and creating jobs, however much he may waffle on about the need for inclusivity, and all that stuff.
If this was his last big outing as Finance Minister, I suppose we can say that he tried as hard as he could. Even if it will do far too little to get this economy moving again.