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Wed Aug 31 23:46:07 CAT 2016

Good in parts, but is Gordhan's dish good enough?

The Times Editorial | 25 February, 2016 00:46

Pravin Gordhan came out fighting for Team South Africa yesterday, appealing to citizens' patriotic instincts and calling for unity to help turn around a faltering economy.

Delivering a Budget many pundits believed would be aimed primarily at the rating agencies, the finance minister resisted the temptation to raise VAT and personal income tax - although a review of the wealth tax set-up is under way - and ramped up expenditure on the troubled higher education sector by R16-billion over the next three years.

He also announced modest increases in social welfare payments for the poor and some relief for farmers hit by drought.

Encouragingly, the government's spending ceiling will be slashed, by R25-billion over the next three years, mainly through the freezing of non-essential posts in the vast, under-performing public service - a major drag on the fiscus.

The question is, will the cuts be enough to stave off a credit rating downgrade to "junk" status?

Emphasising that the National Development Plan - the government's growth blueprint to 2030 - was the cornerstone of his Budget, Gordhan called for co-operation with the private sector to ensure faster growth.

Yet the gulf between the NDP's growth target of in excess of 5% a year and the Treasury's expectation of growth of less than 1% this year could not be wider.

Gordhan opened the door to privatisation of non-performing state-owned enterprises by suggesting that private investors would be able to purchase a minority stake in the ailing SAA, which would be merged with SA Express and other government entities in the sector.

But little mention was made of the fate of other faltering parastatals.

The initial reaction to the Budget speech on the markets was negative - the rand fell - probably because of the perception that it did not do enough to address concerns about growth. Hopefully the ratings agencies take a more sanguine view.

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