Budgets are always a delicate balancing act – but in 2013/14 getting the balance right was more important than usual.
Accordingly, the 2013/2014 Budget was the first budget to be drawn up within the framework of the National Development Plan.
This is according to independent economist Sandra Gordon who was speaking at the Mazars Budget Review in Cape Town. Mazars is a global audit, tax and advisory firm.
“Here, finally, is the beginning of the implementation of the NDP,” said Gordon.
For some time now government has been using its resources to correct the inherited imbalances of the economy – providing basic services and a welfare net for the poor and generating employment through the public service.
“This was achieved within a disciplined fiscal framework as repeated revenue overruns provided the necessary funding. However, this is no longer sustainable in the post-crisis period,” Gordon said.
While the local economy has recovered from the recent recession, growth remains subdued.
This has meant that deficits have been larger than expected and, as a result, public debt has risen. This unsustainable situation has concerned the international ratings agencies and SA has suffered three credit ratings down-grades during the last four months of 2012.
“Agencies are concerned about our ability to reduce spending, particularly social spending or public sector wages, and raise revenue without raising taxes to the extent that the economy slips back into recession.”
Accordingly, the key focus for the 2013/14 budget is how South Africa needs to negotiate its way out of the fiscal cul-du-sac.
Analysts were thus looking for a credible plan to get SA to back onto a track of greater fiscal discipline (without excessive austerity, the impact of which is seen in Europe) and the ability of the budget to reassure investors, both local and foreign.
The latter also reflects growing frustration at the proliferation of sometimes competing economic policy plans.
President Zuma had endorsed the National Development Plan (NDP) in his State of the Nation Address, but was there the political will to implement it? Those were the expectations going into budget.
2013/14 Budget: Charting A New Course
In the budget speech Minister Gordhan acknowledged that the time had come to place SA on a different growth trajectory as even when the economy was growing robustly prior to the crisis, government was not able to adequately address the issues of poverty, inequality and unemployment.
“Now with the world economy in trouble, it becomes even more important that SA gets itself on a new, more sustainable growth path. Thus the budget took the NDP as its point of departure,” Gordon said.
The NDP sets out an integrated strategy aimed at accelerating growth, eliminating poverty and reducing inequality.
In line with global trends there is a realisation that a focus on growth alone will not address the historic problems SA faces but, instead, the focus needs to be on both the quantity of economic growth and the quality of that growth.
“It’s appropriate, therefore, to look at the budget in terms of the measures aimed at boosting growth and those aimed at changing the nature of that growth.”
Article Supplied by: Claire Densham Communications