Although the budget was well presented, it fell short on action
Finance Minister Malusi Gigaba’s speech was well delivered, but represented a huge opportunity cost because the substance of it was so poor. He said all the right things, and there was something for everyone in the speech. But where it fell short was on action. In a recent article in the Huffington Post, Editor Ferial Haffajee concludes that Gigaba has achieved only three of the goals he set himself as part of the 14-point growth stimulus plan. That is sobering. The initial market reaction to the speech was decidedly negative. This was where the action was, as the rand depreciated and the cost of borrowing increased (as reflected by the 10-year South African government bond yield).
There is nothing to celebrate as more lean years of decreasing per capita income loom
The most concerning thing for South Africans is that, based on Treasury’s own projections (assuming everything progresses according to their projections), the situation is dire. Since 2014, population growth has been higher than economic growth. This is expected to continue until 2019, which means a total of six years of increasing poverty and lower per capita incomes.
It was a golden opportunity to show some action, but was sadly missed
Expectations were so low, so even one concrete action or result could have had a major impact. For example, if he had said that government had done something like completed the sale of Telkom shares and so many billion was raised, it would have been very well received and could have marked the start of the positive action necessary to halt our downward spiral. On a positive note, the noise last week that was prompted by the mention of a confidential Budget Mandate Paper proved to be innocuous and was released as part of the MTBS pack. At a time when everyone is collectively paranoid and confidence is low, this controversy was entirely unnecessary.
A win for rational policy analysis as we kick the can down the road on NHI funding
There appears to be a win for rational policy analysis from Treasury regarding NHI funding. Briefly, there appears to be more thought given to the fact that abandoning the current tax credits for medical scheme contributions may well affect middle and lower income earners the most, and disrupt their access to medical care. This realisation isn’t something that everyone will welcome, but it does show a victory for sound analysis (which of itself is something notable in the present day).
Overall, it was a budget of inputs, with little impact at a time when we desperately need some impact and decisive action.
25 October 2017
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