HOW SOUTH Africa will fill the gap that will be left by the withdrawal of US funding is among the critical issues that Finance Minister Enoch Godongwana is expected to address when he tables his budget speech on Wednesday.
Godongwana will deliver his first budget of the Government of National Unity (GNU) under pressure from a chorus of opposition to any plans to increase any taxes and against the backdrop of US President Donald Trump signing an executive order that freezes funding from the President’s Emergency Plan for AIDS Relief.
This as the medium term budget policy statement had projected a budget deficit and revised spending down by R21 billion late last year.
Economist Dawie Roodt said this year’s budget came at a time that the economy was not doing well.
“It is doing quite badly in fact. We have this new variable which is the name of Donald Trump,” Roodt said.
He said the country’s fiscal account was in big trouble as the debt kept rising and dangerously high.
This was compounded by the huge demands on Godongwana from state owned enterprises to collapsing municipalities, civil servants wanting salary increases and millions of people depending on state income.
“All this will add pressure on the Minister’s budget.”
Roodt also said Godongwana will have a political question to answer on whether he will cut state spending.
He speculated that tax increases were on the cards.
“There will be increases in certain taxes, sin taxes, the fuel levy will go up. I believe some items will be zero-rated,” Roodt said.
He was eager to see the targets Godongwana will set for the country’s economic growth.
“I don’t see the economy growing by more than 1.5%. The President cites 3%, but that is not going to happen. Let’s see if the Minister agrees with the President,” he said.
Labour federation Cosatu said what was needed in Godongwana’s speech was a bold, progressive and aggressive budget to capacitate the state to deliver services and stimulate growth, among others.
“The economy will grow if we fix the state, stimulate growth and slash unemployment. It will not grow by squeezing already badly under resourced public services further,” Cosatu’s parliamentary counsellor Matthew Parks said.
He said Cosatu will vehemently reject any increase on taxes upon the working class, in particular VAT or personal income tax for low-income earners.
“A VAT increase will stoke inflation. Such hikes would suck money out of the economy when it is most needed to stimulate growth. It would send a message to society that government cares more about balancing tables and graphs then workers being able to put food on the table and pay for electricity.”
Parks said revenue must be secured through investing in SARS by providing it with the resources it needs to tackle tax evasion and customs fraud.
The SACP, which is opposed to tax increases, expected the budget to advance the rollout of the National Health Insurance.
“The budget must also take meaningful strides towards a comprehensive social security system by making tangible progress to advance the introduction of a universal basic income grant,” the party said.
Cape Times