27 October 2010
The SACP generally welcomes Minister of Finance, Pravin Gordhan’s medium term budget policy statement. It confirms the growing convergence to be found, not just within the ANC and its alliance partners but across South African society in general, on the key priorities of our country. The statement expressly seeks to align budgetary allocations with the key priorities elaborated in the New Economic Growth Path and in the Industrial Policy Action Programme. Notable in this regard is the commitment to sustained state-led infrastructural spending – R811bn over the three-year period, and the prioritisation of key economic sectors including agriculture, mining and mineral beneficiation, the green economy, and tourism and selected services.
Perhaps the highlight of the budget statement was the commitment made to taking tough action against fraud and corruption. The SACP has been calling for transparency in government in regard to the awarding of tenders. We applaud Minister Gordhan’s moves to ensure that when tenders are awarded the reasons for the award will be publicly accessible. Likewise we welcome the intention to impose much stiffer penalties on private contractors who fail to fulfil their contractual obligations, and on government officials responsible for supply chain corruption.
Other important reforms that were signalled in the statement were moves to adopt a new approach to managing capital projects including assistance to departments and local government; and a review of the governance structures of parastatal entities.
It is also clear from today’s statement that Treasury is increasingly aligned with the broader Alliance concern over the impact that an overvalued Rand is having on our economy and particularly on our manufacturing sector. The Minister indicated that the Rand was currently 12% over its average value to the dollar in the recent period. He also announced a series of measures that combined both working at the international multi-lateral level (notably through the G20) as well as implementing country-specific measures.
In regard to the latter, the SACP would have liked the Minister to have moved more decisively towards implementing speed-bump measures, or taxes on incoming capital movements to moderate the dangers of the “carry-trade” (volatile investments attracted by our relatively high interest rates). The Minister, however, did indicate that Treasury would be studying international examples of where such measures are in operation with a view to possible implementation locally.
The SACP is less certain about the wisdom of further liberalisation of exchange controls as announced by the Minister. Apart from the dubious long-term advisability of such a move, we are sceptical that it will be an effective measure (of course along with others) in moderating the current value of the Rand in the short-term.
Overall, however, the SACP welcomes the MTBS and the continued consolidation of a unifying national approach to placing our economy onto a more labour-absorbing and equitable growth path.
Issued by the SACP.
Contact:
Malesela Maleka
SACP Spokesperson – 082 226 1802