A good article from Felicity Duncan from Money Web stable :
"OK, I’ll be perfectly honest, the national budget really does matter. Every year, the finance minister stands before parliament and tells some South Africans what their annual tax bill will be, tells others how much more they’ll be spending on smokes and booze, and tells the rest what kind of increases they can expect in their social grants (with some overlap among these categories). These are all important things, with implications for people’s everyday lives.
The national budget also signals what the priorities of the upper echelons of government are. This year, for example, it was clear that ANC top leadership has prioritised infrastructure investment and job creation, with plans to spend money on projects ranging from upgrading the country’s ports to employing the unemployed to eliminate alien vegetation from its waterways (seriously, look it up).
However, there is an important sense in which the national budget doesn’t matter, a sense which is captured by this quote from Pravin Gordhan’s budget speech : “We are aware of several weaknesses in the state’s infrastructure capacity. In the past, spending has lagged behind plans. Our estimate is that in 2010/11, R178bn was spent out of a planned R260bn, or just 68%. In addition to long delays, we have often experienced significant cost over-runs in infrastructure projects.”
The national budget and the associated medium-term expenditure framework (which is basically government’s spending plan for the next four years) are a blueprint for what the government’s top bosses hope to achieve. However, they are often not much more than that, because the implementation of these plans rests in the hands of other elements of the state, and as South Africa’s infrastructure track record indicates, there’s often a large gap between what the national government wants to do, and what the various arms of the government actually can do. A lot of what appears in the national budget is provisional, and subject to the whims of the employees and associates of the state.
Consider, for example, Gordhan’s projections with respect to the budget deficit. Revenue collection this year was stronger than anticipated, and the minister announced that the deficit would be equal to 4.6% of GDP in 2011/12 (down from a previous estimate of 4.8%), and would fall to 3% in 2012/13. This is great news, especially in light of recent worries about South Africa’s credit ratings.
These projections, however, are based on the optimistic assumption that government will be able to keep increases in its sizeable wage bill (currently equal to about one third of the R1tn national budget) below 7%. This seems very unlikely; after all, spending on wages rose by 11.9% last year, despite the fact that the previous budget projected a rise of just 7.8%. Strike-happy public sector workers demanding above-inflation wage increases could easily derail Gordhan’s plans for fiscal prudence.
Or consider the government’s job creation schemes. For a few years now, Gordhan has been talking about a youth employment subsidy, and I was hoping that this year some flesh would be added to those bones. However, all he had to say about that was “[it] is under discussion at Nedlac, where the labour constituency has expressed reservations. In our view these concerns can be addressed in the design and implementation of the incentive. We would all like to see greater urgency in resolving this matter.”
In other words, COSATU is gumming up the works on the youth employment subsidy, and there’s not much Gordhan or anyone else can do about it. Again, the best-laid plans of the country’s top leadership can be thwarted by the actions of those it relies on; the budget is a guide, not a guarantee.
Since it came to power, the ANC has consistently produced sensible budgets. However, as time goes by, it’s becoming easier to see, in those budgets, the fracture lines in South African politics and the weaknesses of the state.
The government’s key weakness is its lack of capacity, as illustrated by the takeover of elements of the provincial governments of Limpopo, Gauteng, and the Free State, and a chronic inability to spend the money it allocates for infrastructure, job creation, and investment projects. The top leadership of the ANC is generally good, but the rest of the state is desperately short of the technocrats it needs to implement that leadership’s plans. This must be urgently addressed.
As for the fracture lines, the key tension is between those who want a more business-friendly South Africa that encourages economic growth, and those who want to see the state take a more active role in fighting poverty and creating jobs. Gordhan’s latest budget walks a tight line between those two poles, but we’ll have to watch the implementation of the budget to see which side is winning. "
REF : –Felicity Duncan (felicity@moneyweb.co.za)
Kind Regards
Steven
Steven Morris Chartered Accountant (SA)
3 Bickley Road
Sea Point
Cape Town
8005
Mobile :+27 83 943 1858
Facsimile : 0866 712 498
E-mail : steven@global.co.za
No comments:
Post a Comment