FF Plus reaction to medium term budget policy statement
26 October 2016
Minister Pravin Gordhan’s medium term budget sounds very positive with hope for the future if one only listens to his words. IF the figures are however taken into consideration, it is negative and the opposite.
His expected revenue shortfall is R11 billion and R23 billion in the longer term. This means that he is already talking about more than R40 billion in additional taxes which have to be collected in the future. The risk of this is that a too high tax burden can dampen economic growth further instead of stimulating growth.
The FF Plus is disappointed that government is still just talking about state-owned enterprises without real action or decisions having been taken. The minister announced broad measures how state-owned enterprises must be managed, but it appears as if he is passing the ball to the president and deputy president, from where no decisions are being taken about state-owned enterprises.
South African taxpayers can no longer carry state-owned enterprises such as the SAA, Eskom, the Post Office, Landbank, etc. Even if the SAA is given away, it is still positive for the worsening debt situation of the South African government.
Currently, R147 billion is budgeted for the interest on state debt. This budget item is the one that is increasing the fastest of all the items in the budget. Added to this, is the state guarantees for these state-owned entities.
What is positive is that the minister did not give in to pressure to make all kinds of populist announcements. He will be trying to stick to his announced fiscal discipline, for which the FF Plus will be supporting him. This will help to prevent a credit rating downgrade.
The FF Plus believes that the credit rating companies are at present looking at political consequences of the minister’s court appearance and whether he will survive politically for another six months, rather than looking at the figures in the budget alone.
Statement issued by Dr. Pieter Mulder, FF Plus Leader, 26 October 2016
