Budget speech: What economists want

Economists aren’t anticipating any surprises in Finance Minister Pravin Gordhan’s Budget speech.

FILE: Finance Minister Pravin Gordhan will announce his Budget speech in Parliament on Wednesday. Picture: Supplied.

JOHANNESBURG - Economists and commentators are not anticipating any surprises in Finance Minister Pravin Gordhan's Budget speech on Wednesday.

The announcement sets the tone for government's spending priorities and is keenly digested by South Africans and pundits alike.

But ahead of the 7 May general elections, the minister is widely expected to avoid any extreme measures.

Stellenbosch University Bureau of Economic Research (BER) senior economist Hugo Pienaar explained what might be announced.

"Given that it's an election year and the economy is under pressure, I don't foresee an increase in personal tax rates in the top income bracket. What the minister normally does is he adjusts the tax bracket according to inflation.

"There's a zero percent chance VAT will go up. Sin taxes will certainly go up. The fuel levy will go up and this against the petrol price having already gone up in the last few months."

Pienaar explained what most economists were hoping to be announced.

"Most economists want to see a shift in composition of spending from current expenditure in paying public servants by employing more public servants.

"We would rather like the budget going more to capital expenditure such as building hospitals and roads. We would also like to see the delivery of these projects improved."

The Budget Expenditure Monitoring Forum (BEMF)'s Thokozile Madonko says, "South Africa's measure of inequality is one of the highest in the world and has increased since 1994.

"Given the need for services in health, education, social development, and safe and clean places, BEMF believes Gordhan must present a different spending plan that provides for establishing a public sector capable of playing a bigger role in the economy and reducing inequality."

Madonko added the BEMF believes the rich need to be taxed "so that the poor can live better lives."

"For instance, some taxes are disproportionately borne by poor communities and in the case of Value Added Tax (VAT) where it applies to the purchasing of basic food stuff, healthy foods such as vegetables, fruits and so forth, it is very expensive for poorer households.

"Without raising sufficient funds, the government cannot pay for the goals it sets itself and promises to South Africans."

Madonko advocates a national, provincial and local budget plan to pay for the services needed such as electricity, drinking water and sanitation.

"While South Africa ranks in the top three for budget transparency at the national level, this has not translated to budget transparency at provincial and local levels, nor has it translated into greater public participation in the budget process.

"In order for government's policies to be successful, it is critical that civil society and communities are involved in allocation decisions and operational matters."