Catholic Parliamentary Liaison Office Comments on the 2011/12 Budget

There is a lot to be said for a boring budget speech, such as the one that Mr Pravin Gordhan has just delivered. There was no need for him to announce any particular tough measures: no increases in income tax; no more than the usual jumps in sin taxes and fuel levies; a borrowing requirement that, although a bit higher than previously, remains low, and quite manageable, by international standards.

Mr Gordhan also avoided making rash promises and imprudent predictions. Thus, while he listed the allocations that will be made to job creation and skills training, he did not mention the absurd figure of ‘5 million jobs by 2020’, which the President and other Ministers have bandied about. What tax relief he offered was - as he very openly stated - no more than compensation for the effects of inflation and cost-of-living wage increases. Most ministries received modest budget increases, with some emphasis on the social cluster comprising education, health, social development and the expanded public works programme.

But if the headline items left us neither downcast nor wildly inspired, there were quite a few other points that are worth mentioning; and they mostly demonstrate that Mr Gordhan is comfortably in charge of his portfolio.
More than once, he referred to the ‘decades-long transformation’ of the economy. Was this perhaps a hint to those who are calling for radical measures like mine nationalisation that they are wasting their breath? Likewise, he stressed that the Reserve Bank would focus on trying to minimise volatility in the Rand exchange rate, rather than committing it to a weakening of the currency, which COSATU and others appear to regard as an economic panacea. He also stated that the commitment to inflation-targeting would remain in place, another stand that is unpopular in some parts of the alliance.
In noting that the public sector wage bill has more than doubled over the last five years (it now accounts for 40 percent of state expenditure), was he hinting that significant increases in the next few years are unlikely? And for those who argue that we should incur debt now in order to finance a much-expanded state expenditure on socio-economic needs, he had a ready answer: we must have ‘inter-generational equity’ - not thrust the burden of paying back today’s loans onto the shoulders of our children and grandchildren.
So, all in all, a sober, calming, unspectacular budget from a man who knows what he is doing, and who appears to have the backing of his President and his cabinet colleagues. Or does he? It was disappointing to hear Mr Gordhan refer to the R5bn youth employment subsidy as still being ‘subject to consultation’. He first announced this scheme in last year’s budget speech, but it has effectively been blocked by organised labour, which sees it as a threat to the jobs of its members. The disastrous effects of this kind of delay in implementing a much-needed incentive were clear from a statistic given by Mr Gordhan himself: 42 percent of 18 to 29-year-olds are unemployed. It is more than worrying that, in the face of this figure, government is still ‘consulting’ about a simple intervention.

He also admitted that “taxpayers do not get full value for money” in state procurement deals. The truth of this statement could not have been better illustrated than by the report of the Public Protector, issued the day before the budget speech, into the R500 million lease of a new police headquarters in Pretoria. The lease was approved by the Minister of Public Works despite the opinions of two senior counsel that it was null and void. The Minister’s action was found to be unlawful and reckless; Police Commissioner, Bheki Cele, was guilty of improper conduct and maladministration.

President Zuma’s response to the Public Protector’s findings will tell us a lot about whether Mr Gordhan’s various protestations about tackling corruption and giving taxpayers ‘value for money’ represent a genuine commitment on the part of government; or whether they are merely his personal views, conveniently served up for the record, while the financial improprieties of senior colleagues in the public service go unpunished.
Mike Pothier
Research Coordinator
Catholic Parliamentary Liaison Office

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