There's no crisis in SA, says Gordhan

Jobs in government will not be so easy to come by in the next few years.

In a veiled swipe at trade unions, Finance Minister Pravin Gordhan said specific targets would have to be set for personnel numbers.

In a sombre medium-term budget policy statement delivered to parliament yesterday, he emphasised that "there will be no additions to the overall spending level".

Gordhan had to allay fears that South Africa was on a path of "fiscal drift" after downgrades by ratings agencies Moody's and Standard & Poor's in recent weeks. The downgrades could make South Africa's government debt more costly.

By next year, about 10% of the budget will be going towards paying the interest on debt.

Gordhan called the downgrades "inappropriate", but said they were "a cause for urgent reflection".

He hit out at international observers' concerns about uncertainty on the eve of the ANC's elective conference in Mangaung , saying most of their observations were out of line.

"I think there are too many people who are outside of this country who are making judgment calls on this country who don't understand our history well enough, who don't understand where we come from as a country and as a political culture and who make negative pronouncements that are out of line.

"There's no catastrophe that's gonna hit our country at this point in time," Gordhan said.

The largest share of spending goes towards paying government employees and this has grown faster than other categories over the past four years, according to Gordhan.

A painful wage dispute between public-sector trade unions and the Department of Public Service and Administration dragged on for months and ended in an unpleasant multi-year increase surprise for the Treasury.

The National Education, Health and Allied Workers' Union accused the government of negotiating in bad faith.

Wage increases of 7% this year have forced the Treasury to adjust forecasts in its February budget. It had to scrape together an extra R1.5-billion for national government employees and another R4-billion for those in the provinces. Although it might not sound like a lot compared to a R336-billion wage bill, it does escalate.

According to the mini-budget, the deal is expected to cost an additional R37.5-billion over the next three years.

"Over the period ahead, government will take a more deliberate approach to managing overall employment and wage trends across the public sector, including state-owned entities. In particular, government will curtail unwarranted growth in personnel numbers," read the policy statement.

It is clear Gordhan wants to send out the message that he is serious about containing costs. He said that over the next three years as much as R40-billion has been "reprioritised". He also talked about shifting expenditure towards "social and development objectives". Some will go to infrastructure.

A large chunk will be swallowed up by a growing proportion of the population dependent on state support. This form of spending will reach R136-billion next year and the number of people receiving grants is expected to reach 17million by 2015, according to Gordhan.

The Treasury now expects economic growth of 2.5% this year, down from 3.1% earlier. Gordhan attributes this to "both global uncertainty and disruptions to domestic production". But some economists fear that the paralysis in large parts of the mining sector, coupled, with the recent transport workers strike and a slowdown in the manufacturing sector, will suppress growth further.

Tax revenue is already expected to be R5-billion less than the estimate in February.

According to Gordhan, government's response to the 2009 recession has led to a dramatic widening of the deficit. By the time debt stabilises in 2015/16, more than R1-trillion will have been added to the government debt, according to the budget.

He said the government debt will peak at 39% of the country's gross domestic product in 2015. This compares favourably to most developed countries, but it has grown faster than the debt of most emerging markets in recent years.

BUDGET HIGHLIGHTS

FINANCE Minister Pravin Gordhan released his m edium-t erm b udget p olicy statement yesterday. Some of the new elements are:

DEFICIT

BUDGET deficit is projected at 4.8% of GDP for the fiscal year to March 2013. The deficit is projected to fall to 3.1% by 2015/16.

GROWTH

GROWTH forecast is trimmed slightly to 2.5% for 2012, from 2.7% in February. GDP is projected to grow to 3% in 2013 before reaching 4.1% in 2015.

INFLATION

INFLATION to average 5.7% in 2012, within the 3% to 6% target range, and to remain target-bound over the next three years. Inflation expected to decline from 5.5% in 2013, before touching 4.9% in 2015.

REVENUE

TOTAL government revenue for 2012/13 is estimated at R900-billion, or 27.5% of GDP.

SPENDING

TOTAL government expenditure in 2012/13 set at R1.1-trillion, or 32.5% of GDP. Spending seen at R1.1-trillion and R1.2-trillion over the following two years.

INFRASTRUCTURE

PLANS to spend R845-billion on infrastructure over three years reiterated.

DEBT

TOTAL net government debt to hit R1.16-trillion, or 32.8% of GDP, by end of 2012/13, rising to R1.71-trillion by 2015/16, or 39.2% of GDP.

BORROWING REQUIREMENT

NET borrowing forecast at R165-billion for 2012/13, rising to R173-billion the following year, before easing to R162-billion in 2014/15.

CURRENT ACCOUNT

CURRENT account deficit expected to widen to 5.9% of GDP in 2012, from 3.3% last year, as the trade balance deteriorates as a result of the euro crisis. - Reuters

Bouquests for 'bravwe minister'

POLITICAL parties have welcomed Finance Minister Pravin Gordhan's commitment to stamp out corruption and wasteful and irregular expenditure, but have questioned whether cabinet ministers will toe the line.

DA MP Tim Harris said he doubted Gordhan's ability to hold departments to account for wasteful and fruitless expenditure that had spiked into the billions.

"On the one hand, we welcome the commitment to fiscal consolidation; on the other, we are very alarmed by the Treasury's influence in the economic cluster of cabinet," he said.

COPE MP Nick Koornhof said Gordhan needed departments to heed the call to curb spending.

"The finance minister was brave today; it was time to hit the brakes. Now, we hope to see that the departments and the provinces and his cabinet colleagues and the president come out with guns blazing to support him. If they don't do that, he will fail," he said.

ACDP MP Steve Swart applauded Gordhan's strong message on corruption.

Both Harris and Swart said the decision to freeze expenditure was a wise move.

However, Harris said he was concerned policies to improve and sustain the economy might just be grand posturing.

Nedbank senior economist Nicky Weimar said: "The economic growth forecast might be slightly tilted to the optimistic side, but it is broadly realistic. They acknowledge the areas where we know there are weaknesses and that are generally holding the economy back, which are mainly your export side of the economy and your production side of the economy. In other words, these are your mining and manufacturing sectors.

"Even before all these setbacks, we were already running a current account deficit of over 6% of GDP, which is simply not sustainable."

- Denise Williams, Reuters