The finance minister of South Africa, Minister Pravin Gordhan confirmed that the economy of South Africa is indeed in a crisis. For this reason he increased wealth taxes and cut “wasteful”and “corrupt”government spending such as the high value cars bought for politicians in a ‘crisis’ budget that is aimed at saving the economy without increasing government debt.
South Africa’s economy has been plagued with a shrinking economic growth, unemployment and poverty. In a press conference before Mr Gordhan presented the budget to the parliament, he said;
“We cannot spend money we do not have. We cannot borrow beyond our ability to repay
“Until we can ignite growth and generate more revenue, we have to be tough on ourselves.
“There is no doubt about the fact that we are in crisis.”
In a bid to boost economic growth, he announced that the government would have to work with the private sector . Although he denied allegations that he plans to privatize South Africa’s economy, he admitted that the private sector is needed especially in state owned enterprises such as the South African Airways, that are performing below par.
The minister also increased taxes on excise duties, capital gains, fuel, sugary drinks alcohol and so on. Environmental levies will also be imposed in order to raise an extra 18 billion rand ($1.18 billion).
Although personal income tax was not made subject to the tax hike, the minister confirmed that taxes on wealth are currently under review.
Government expenditure will also be reduced by 25 billion rand ($1.64 billion) over the next three years, and the minister proposes to tackle tax crimes, he said;
“We will continue to act aggressively against the evasion of tax through transfer pricing abuses, misuse of tax treaties and illegal money flows”
Gordhan was brought back to power after President Jacob Zuma fired two finance ministers within four days.
Opposition party, Democratic Alliance, said the minister had “announced no significant new measures to boost economic growth and create jobs.”
Unperturbed, he made mention that the downsizing of government expenditure will not affect social services negatively.
In regards to the Fees Must Fall campaign, he proposed 6 billion rand ($1.05 billion) for higher education, saying “we are crafting solutions to the voices of students regarding fees and housing”.
Also in relation to budget deficits, he said; “Net national debt is projected to stabilize at 46.2 percent of GDP in 2017/18, and to decline after that.”