The midterm budget policy statement presented by finance minister Malusi Gigaba this week will provide no comfort to SA, as he admits that tax collections fell far short of expectations and, with an ever increasing national debt, make it more expensive to borrow to cover the shortfall.
He is severely limited in his options to raise the finance to meet government’s budget. He could make it compulsory for insurers and banks to invest in treasury bills, increase company tax and penalise high earners, but these will be detrimental to long-term growth.
What he should do, of course, is to cut civil service employment, increase Vat by a percentage point and sell off the state-owned enterprises, whose debt now tops R300bn.
After all, the function of government is to govern, not to trade, and to curtail corruption, which is the biggest impediment to growth.
Treasury has lost talented staff since former finance minister Pravin Gordhan was fired, and Gigaba seems to lack the imagination or the personal strength to enforce unpopular measures that will ease the country’s economic woes.
The rating agencies that have us on review will need to take something positive from the budget, failing which a fiscal cliff awaits us.