How Far Will You Get If Your Are Sitting In Your Corner

The 2012 Budget Speech by Pravin Gordhan delivered few surprises. Aside from his request for members of parliament to stop whistling at the high proposed capital gains taxes, or his attempts at reading Zulu proverbs (Uzothola kanjani uhleli ekhoneni, or How far will you get if you are sitting in your corner), the budget did what it was supposed to do: begin the slow process of roping in anti-cyclical fiscal policy (i.e. a lower budget surplus and debt) now that the economy is growing again. Minister Gordhan, as per usual, increased sin taxes (R36 on tax for a bottle of brandy!) and announced tax reductions (which are mostly the result of bracket creep). Surprisingly, the increases in the social grants are all below inflation rates, marking what I believe is a significant step in rewarding productive activity rather than hand-outs. All in all, I think, he did pretty well.

What made his task difficult, of course, was the emphasis on infrastructure investment, as outlined in Zuma’s State of the Nation address. Minister Gordhan took some time to explain the various sources of infrastructure finance: while government (through the budget) will continue to finance social infrastructure like schools, clinics and courts, investment in economic infrastructure is (mostly) outsourced to the parastatals. Eskom and Transnet will receive little government transfers to finance their massive investment programmes, while telecommunications infrastructure will also be financed by the private operators.

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