Pravin Gordhan’s Medium Term Budget Policy Statement yesterday underscores the central role that politics plays in the economy.
For all his honourable intentions and fine words, Gordhan did not have a good story to tell about the state of our economy. For all his brave talk, there is not much in our economic outlook for South Africans to be optimistic about. Because Gordhan’s economics are being derailed by Zuma’s politics.
Mr Gordhan promised things he cannot deliver on. His objective of inclusive growth and social transformation is no longer the ANC‘s objective. We applaud his efforts to grow confidence in our economy, but they are being severely undermined by the political machinations of his own party, which is more intent on diverting public funds to private ends.
Mr Gordhan quoted Amilcar Cabril. I will do the same: “Always bear in mind that the people are not fighting for ideas, for the things in anyone’s head. They are fighting to win material benefits, to live better and in peace, to see their lives go forward, to guarantee the future of their children.”
Mr Gordhan delivered a statesmanlike speech. But in its fineprint, we learn that our economy is not going to deliver the material benefits, the better lives and the brighter future for their children that people want. Our economy is stuck in a debt trap: debt servicing is our fastest growing line item. We are incapacitated by slow growth, forecast at only 0.5% this year, giving little hope of respite to the 8.9 million jobless South Africans.
We learn that next year, the government will have to raise taxes very significantly, due to revenue collection falling short of target (another indicator of the real state of the economy), coupled with a need to increase spending on higher education, national health insurance and social grants. Unfortunately, higher taxes will do nothing to help our economic growth prospects.
What is holding our economy back? Click here to keep reading about where I think the root of the problem lies…