Taxing Budget day: Lack of support for Gordhan not good for the economy

22 February 2017 - 08:15 By BABALO NDENZE and BIANCA CAPAZORIO
Finance Minister Pravin Gordhan
Finance Minister Pravin Gordhan
Image: Siphiwe Sibeko/Reuters

A politically "vulnerable" Pravin Gordhan will deliver what could be his last Budget speech today - and he is expected to make an announcement on tax increases that could make everyday lives more difficult.

Gordhan faces the unenviable task of selling a budget he may not be around to help implement, as analysts note he faces unprecedented attacks from some in the ANC.

Tax increases are on the cards as the government looks to increase its revenue base.

Simultaneously, rumours of Gordhan's pending axing to make way for former Eskom CEO Brian Molefe also refuse to go away.

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Economist Mike Schussler said "from the outside" Gordhan "seems very vulnerable. It's a tremendous story this. A person asking South Africans to pay more taxes and to believe that things are going to get better", [when he might] not be around for much longer. South Africans wonder what their taxes are being used for. I don't see smaller class sizes, I don't see better hospitals," he said.

He said in light of a possible tax increase: "I think people are under tremendous pressure". He agreed that the perceived lack of support for Gordhan did not bode well for the country's economy.

"We've had luck with the rain and a bit higher commodity prices. But the forecast for South Africa is that the economy is not going to grow [especially] with the high unemployment rate," he said.

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Political analyst Ralph Mathekga said what Gordhan was facing was "unprecedented" for a finance minister.

"He's vulnerable in two ways. The first is how credible is his Budget to be? Is it the type of Budget you think will form part of policy? But what you notice that has been happening is a lot of ministers have actually started challenging the Budget, ministers saying disparaging things about the Treasury. This has never happened," said Mathekga.

"Number 2 is a simple question about the possible removal of Pravin. You can imagine when you're supposed to prepare a Budget but you hear all sorts of noise that this might be your last week," said Mathekga.

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The head of parliament's budget office, Professor Mohamed Jahed, said the Budget would reflect the State of the Nation's focus on radical socioeconomic and transformation, and priorities such as the National Development Plan, energy, security, investment and social issues.

He said the "fixation will be on the R28-billion [in additional tax revenue] we need to collect going forward". Jahed said tax revenue collection in 2016 had been 2% lower than the Treasury had originally anticipated, creating a R23-billion shortfall.

Gordhan would need to prioritise servicing the country's debts, which in October stood at around R148-billion.

Jahed said the possibility of an increase in VAT as a way to quickly and efficiently raise revenue had been on the cards for a number of years, although Gordhan has repeatedly indicated he would not balance his Budget on the backs of the poor.