Some thoughts on Budget 2013 Reply

On Wednesday afternoon Minister Pravin Gordhan will deliver the 2013/14 Budget Speech in Parliament. The speech should not contain any surprises. Government has little choice but to stay the course in the bigger scheme of taxes and spending. Clues for policy priorities are available in last year’s mini-budget and this year’s State of the Nation Address. I predict public finances under pressure from a slow growing economy and smaller tax take. This means only small increases in social spending and little tax relief. We’ll see the predicatable increases sin taxes and further closing of whatever loopholes remain.

The more interesting question is whether the budget can operationalise the policy priorities of the SONA (and NDP). Where the SONA should outline a vision, the Budget should put money to specific plans. This year’s address presents something of a challenge to the Minister of Finance. Last week Steuart Pennington asked: Who was the audience of the SONA? (HT @MensDom for this link) The President addressed 40 separate issues in some detail but there was a lot less detail on the proposed actions.

Pennington writes:

These words may sound harsh, but when he mentioned, early on, the National Development Plan and the five priorities of:

  • Education
  • Health
  • The fight against crime
  • Creating decent work
  • Rural development and Land Reform

I felt comfortable and my attention was focused

Then we got onto the Infrastructure Plans…Shew! Huge detail

Then in the next 1000 words or so another 15 or so priorities were presented – from broader economic transformation through a revised BEE Act – to the private sector absorbing 11 000 FET graduates –  to tourism –  to rhino conservation –  to mining –  to NEDLAC – to tax policies –  to the GAP market.

So what about the NDP I thought, what are our plans in that regard, what are the milestones, what are the measurables?

Another 2000 words and more priorities. Then finally our President concluded, “As I said earlier, this programme of action will be implemented differently as the activities of departments must be aligned with the National Development Plan.”

What does that mean?

Can the Minister of Finance add that meaning? Looking back at last year’s Budget Speech it shows that it is possible. In 2012 I wrote:

Today’s spending and taxation proposals target the fundamental drivers of growth: savings and investment, human capital and infrastructure. This is the interesting part. I have not done any exhaustive analysis but it feels like the Budgets of the mid-2000’s were mainly about macro-stability and social spending. Some infrastructure spending was promised, but growing the economy and creating jobs were left to the private sector. Today’s budget smacks of a much more active government plan for the economy. Levers of economic change are identified: infrastructure, industrial development and SEZs, R&D, education and skills development:

  • There are approved and budgeted infrastructure plans of R845 billion over the MTEF: R30 billion in the energy sector, R262 billion in transport and logistics.
  • Funding comes from a mix of taxes, debt, user charges and private investment.
  • With key roles for DBSA, IDC, PICC.
The Minister said “No good project will be short of funding”.
Exactly what a Budget Speech should do and I expect more of this on Wednesday. After that we have to talk about the issues of implementation.

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