Budget 2016 - Discussion thread

Where's the drinking game rules? Should add "down the bottle when he mentions sin taxes".
 
SA's most important budget since 1994

To say that this is South Africa’s most important Budget since 1994 is an understatement. The reality of a declining economy deeply entrenched in a seemingly endemic inability to break out of downfall mode has left both domestic and foreign investors despondent, demoralised and downright depressed.

Frankly, to expect the proverbial rabbit to be pulled out of the hat to prevent the dreaded ratings agency downgrade seems unlikely. It may just be too late.

And, for once, economists and their related species, political analysts, should take some credit for the many warnings issued over as many years. If you fail to address policy paralysis – and also fail to encourage a diversification of your economy to the demands of the future – you will simply be left behind.

So here’s the rub: President Zuma (and Finance Minister Gordhan) has set Budget 2016 up as the critical speech to watch. It’s almost Rubicon-esque in importance. If it fails to deliver, expect the depression now to cascade to disaster mode.

South Africa’s economic woes have been a long-time coming. With the complex and confused ideological approach (and structure) of the ruling ANC Alliance, policy paralysis and populist experimentation has long contributed to the precipice we currently face. Not to mention the creeping cronyism and patronage network of ‘Big Man’ politics that not only creates immense wastage but also denudes the country of efficient service delivery and management skills.

When you look at these factors, there are few signs that the big picture malaise can be turned around in the short-term. Indeed, the political structure of the ANC and the power politics as practiced by President Zuma largely prevents this. These are deep-rooted structural and largely political issues that have placed access to power and resources first and put economics deeply in second place.

So, just how much ‘rescue remedy’ can be applied tomorrow? The clear signs are already there from Jacob Zuma’s SONA address. At the very least, we are witnessing a budget at a time when Zuma is at his political weakest. His SONA speech seemed to defer most of the economic authority to Gordhan. At least we can expect a Budget to touch on the critical challenges facing the country even if the deeper structural issues can simply not be rectified in the short-term.

So Gordhan walks the proverbial political tightrope. But, he has it easier since a continuation of the current ruinous road is patently clear. The Budget looks as though it will call for a drastic revision of the State Owned Enterprise (SOE) model. It will extol the virtues of public-private partnerships to reel in the battered business sector desperate for any lifeline thrown by the State.

It will address spending cuts and proposed large-scale government austerity. It will try and find a common ground between labour, the State and Business. It will talk about a looming debt crisis in the country and warn South Africans of the dangers thereof. It will attempt to deal with the twin deficits and it will warn of the dangers of inflation and the extreme knock on effects of inflation and public sector wage pressures. And, it will hopefully try and reverse that very dangerous debt to GDP slide that can spiral out of control.

Above all else, it will be a budget that does not only blame the outside world for the larger macro-environment – but will look more inwards at what South Africa itself can do to attempt a recovery.

So, it’s going to sound good. On paper that is. The key question is whether the identification of what’s needed can be translated into action. And ultimately, unless that aspect penetrates all key government departments and ministries and is equally effectively communicated in unison by all senior officials, little will come of a good piece of speech writing.

Put differently, it’s time to ditch the ideological antipathy towards the market. Yes, you might not like the inequalities and social dislocation that often is associated with the private sector. But, the deep lack of understanding of the market and the equally deep suspicion for it dampens confidence.

The ANC also needs to understand that South Africa’s own business community – when they feel better – will express this globally and will be only too keen to ‘talk-up’ the country’s prospects.

Make no mistake though; the political constraints on allowing Gordhan to really implement remain intact. The heavy hand of state interventionism; deep entrenchment of politically-connected individuals; an antipathy to the market and a failure to understand what it means to be globally competitive in a volatile world runs deep. And, if you’re going to increase the tax burden on an already-stretched middle class, these four key aspects have to be ameliorated to build any confidence in the future.

But wait – politics is there too. A jittery ANC facing a poor poll performance in looming local government elections does not endear itself to a tougher approach on trade union wage negotiations or the pruning of a bloated public sector.

So Minister Gordhan can only but set the scene with the right language. He can make some immediate gestures like the cost-cutting already mooted and he can commit to a broad range of improvements.

However - despite his apparent power – can he translate his words into a longer-term script to be followed rigorously and religiously from ministries to department to the legislative environment?

It’s a tall order for any Minister of Finance – especially for someone forced to sit in economy class as a result of his own government’s performance. Gordhan though, is likely to cross his own Rubicon – the question is who will be brave enough to follow him.
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I honestly think we'll see some drastic things, but nothing that will immediately alter the course of things.....

The big things will be cost cutting or increasing revenues... hopefully its a combination of both with more of a focus on cost cutting. But being an election year that is problematic for Pravin to pull off. He is between the proverbial rock and a hard place on this one.
 
Vat is definitely going up, which will result in everything else increasing.
 
cost cutting should be a major area of concern, even more so due to the upcoming election?
Increasing revenues should also be a concern, not at the expense of the working class.
 
I really hope things change for the good but history prepares me for an anticlimactic speech of income and sin tax being raised.
 
Doubt there will be much in the way of cutting Gov spending. I just know this whole budget will be designed to rape me. I stopped smoking 5 months ago, so I at least have something to crack a small smile about.

I am starting to think that the poor are far better off, than the middle class.
 
HBee said:
Doubt there will be much in the way of cutting Gov spending. I just know this whole budget will be designed to rape me. I stopped smoking 5 months ago, so I at least have something to crack a small smile about.

I am starting to think that the poor are far better off, than the middle class.
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You'd be wrong.
 
NarrowBandFtw said:
In terms of benefit derived from tax vs contribution made to tax he'd be right. Although it is likely the case in most countries.
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If you're in the position to make more of a tax contribution then you likely don't need or rely on the kind of benefit you're talking about.

Remember, the roads middle class folks drive on, the universities their kids study at etc. are also part of the 'benefit derived'.
 
Fuel levy will go up.


Personal income tax very likely to go about by 1%.
VAT going up will raise a lot of moola, perhaps 0.5% and this will be well received by the ratings agencies....
CGT will also be raised.
A Dividends tax raise will add more to the coffers and yeah SIN TAX increase will just be the icing on the cake that ordinary South Africans love !!!!!!
 
OrbitalDawn said:
If you're in the position to make more of a tax contribution then you likely don't need or rely on the kind of benefit you're talking about.

Remember, the roads middle class folks drive on, the universities their kids study at etc. are also part of the 'benefit derived'.
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Of course, don't get me wrong I reckon it is perfectly normal that those with the means contribute more and benefit less directly. There is a limit though and I fear we're past it when corrupt officials benefit greatly from our hard earned contributions, the poor still benefit more or less the same, yet those who essentially pay for it all cannot offhand mention any direct benefits that are noteworthy.

Think Sweden with free healthcare and education for all, even Netherlands where my emigrated sister and her family get a grant to help pay for the kids' daycare with is horribly expensive. Sure infrastructure of all kinds benefit us all, but once it has been built and payed then what?

Eskom for example had excess capacity and managed to mothball / mistreat / kill it to a point we're we suffered load shedding for a long time and lost economic growth, that capacity was already built and paid for, now we see headlines of a dodgy nuclear power deal and we know we (the middle class) are about to pay for something big to fix a pure mistake from our guavamint.

I haven't done any proper research, just have this sinking feeling that the middle class gets precious little for their contribution compared to other countries.
 
NarrowBandFtw said:
Of course, don't get me wrong I reckon it is perfectly normal that those with the means contribute more and benefit less directly. There is a limit though and I fear we're past it when corrupt officials benefit greatly from our hard earned contributions, the poor still benefit more or less the same, yet those who essentially pay for it all cannot offhand mention any direct benefits that are noteworthy.

Think Sweden with free healthcare and education for all, even Netherlands where my emigrated sister and her family get a grant to help pay for the kids' daycare with is horribly expensive. Sure infrastructure of all kinds benefit us all, but once it has been built and payed then what?

Eskom for example had excess capacity and managed to mothball / mistreat / kill it to a point we're we suffered load shedding for a long time and lost economic growth, that capacity was already built and paid for, now we see headlines of a dodgy nuclear power deal and we know we (the middle class) are about to pay for something big to fix a pure mistake from our guavamint.

I haven't done any proper research, just have this sinking feeling that the middle class gets precious little for their contribution compared to other countries.
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Sure, I agree with you regarding wastage, corruption, ineptitude etc.

But infrastructure (including Eskom's infrastructure) isn't finished using resources once it's built. Maintenance is hugely expensive. Take a look at the backlog (in terms of cost) that our water and road infrastructure has, for example.
 
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