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Press Release – 2016/02/25: SEIFSA WELCOMES MINISTER GORDHAN’S BUDGET

By 25th Feb 2016Sep 20th, 2019No Comments

Speaking after Finance Minister Pravin Gordhan’s budget speech this afternoon, SEIFSA Chief Economist Henk Langenhoven said the budget indicated that the primary balance (current expenditure vs income) will be positive from this budget period onwards.

During his budget speech, Minister Gordhan said that the Government will:

  • cut the spending ceiling over three years of the Medium-Term Expenditure Framework;
  • cut consumables such as travel and vehicle purchases;
  • restrict the filling of expensive vacancies and reduce headcount through betterpersonnel practices;
  • contain spending by cutting R25 billion off the State’s R500 billion a year procurement spend and investigate all contracts with a value of R10 million and higher.

“These are welcome but high targets to meet. If achieved, this budget may indicate a turning point,” Mr Langenhoven said.

He added that it seemed clear that provinces and local authorities had reached their peak in terms of headcount and drag on the fiscus, with no increases in spending allocations and strong indications from the Treasury that they will have to consolidate.

This may be the benefit of Minister Gordhan’s stint at Cooperative Governance and Traditional Affairs and his intimate knowledge of the dynamics there.

Mr Langenhoven said notwithstanding the Government’s concrete plans to cut its expenditure significantly, he remained of the view that Minister Gordhan’s speech lacked solid measures to improve domestic demand.

“In the light of the very soft and hugely competitive international trade environment, one of the best stimulatory measures within the Government’s control would be to channel spending to local producers,” he said.

The Minister listed initiatives to support growth and development, many of which are commendable, such as building on the success of the independent power producers’ programme, fostering agro-processing and streamlining trade flows, among others. Mr Langenhoven expressed concern that not much was mentioned about stimulating the local economy by allocating spending to local producers.

Commenting on the extent to which the Minister’s speech re-established general confidence in Government and the country, Mr Langenhoven said that the Minister struggled to find any signs of confidence returning in terms of positive economic data.

He said that studies showed that the perceived positive impact of a weak currency on competitiveness and exports is not well founded and the decline in the terms of trade was further evidence of that.

However, the announcements of measures to enhance fiscal constraints in the face of severe pressures for expanded involvement of Government either as direct employer or spending increases contributed to confidence building.

“Much has been achieved by this budget, although uncertainties abound. Much more needs to be done to change course on complimentary policies that are inhibiting growth and investment. World economic recovery will happen, but whether South Africa will be part of such a recovery rests a great deal on its own efforts,” Mr Langenhoven concluded.

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