Magazine article African Business

Pravin Gordhan Fails to Win over Critics

Magazine article African Business

Pravin Gordhan Fails to Win over Critics

Article excerpt

IN WHAT WAS ARGUABLY ONE OF THE most anticipated budget speeches in South Africa's recent history, finance minister Pravin Gordhan announced that the government's main aim for the coming year would be fiscal consolidation--despite having to grapple with low growth projections.

Against a backdrop of slow growth, rising debt and increasing interest rates, Gordhan declared the government will reduce the budget deficit to 2.4% by 2019, cut expenditure by R25bn ($1.6bn) over the next three years and increase tax revenue by R18bn by 2017.

Meanwhile, GDP growth for 2016 was revised to 0.9% compared with earlier estimates of 1.7%.

Some analysts argue that the budget hasn't gone far enough, avoiding controversial questions around income tax and VAT as well as proposals to sell off state-owned assets to shore up much needed revenue.

As William Jackson, senior emerging market economist at Capital Economics says: "South Africa's 2016 budget was a damp squib and is likely to dent the government's recent efforts to regain economic policymaking credibility.

"While the budget is now based on more realistic growth forecasts, the revenue-raising measures announced today don't seem to amount to much and didn't live up to expectations following President Jacob Zuma's state of the nation address. Moreover, there was little said about privatisation in South Africa which would help boost revenue."

Zuma's address on 11th February stressed an about-turn in policy for the President--criticised by some for his lavish spending--when he called for fiscal restraint to pacify anxious investors and ratings agencies, disappointed by South Africa's growth trajectory. …

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