Trade Deficit: Dubious timing of change needs better explanation by Minister Gordhan
The timing of SARS's decision to include Southern African Customs Union (SACU) data in the calculation is dubious. The DA will be putting parliamentary questions to the Finance Minister asking him to explain the decision.
Given the change in measurement, our trade deficit for 2013 appears to have been halved and our trade deficit for last year drops to less than a third of the original figure. The decision does not change the fundamentals of our trade situation, only the way it is measured.
The scepticism with which the markets regarded the move is understandable, given the timing of the announcement that came:
- in the months before a national election;
- just before the ratings agencies begin their reviews of our creditworthiness; and
- a day after Parliament rose for the year, meaning the standing committee on finance will not be able to consider the decision until next year.
It is broadly accepted that South Africa's twin deficits - fiscal and current account - represent significant vulnerabilities in our economy. The solution is to implement the strong market reforms the DA called for last month, not to use smoke and mirrors to make them appear smaller.
Yet, in the past few weeks National Treasury has changed the measurement of both deficits to make them appear smaller.
Last month the Finance Minister announced a change in the way the fiscal deficit is calculated to include the proceeds of privatisation and currency adjustments. Because of this change, it appears as if this year's budget deficit has moved from 4.6% to 4.2%. In effect, government has conjured up an additional R11 billion (from bond and currency adjustments) to help reduce the budget deficit.
This means, if government decides to sell state assets - like they did in 2009 when Telkom sold R4 billion worth of Vodacom shares - the proceeds will simply be used to bring down that year's budget deficit.
There are serious questions around the timing of both of these changes, as well as their justification. The DA will put these questions to Finance Minister Pravin Gordhan at the first available opportunity.
Statement issued by Tim Harris MP, DA Shadow Minister of Finance, November 17 2013
Click here to sign up to receive our free daily headline email newsletter
