Gordhan’s baptism of fire

FINANCE Minister Pravin Gordhan has committed the government to massive borrowing to sustain spending on job creation, education, health, rural development and fighting crime – and a major crackdown to rein in wasteful state spending and corruption.

Dealing with a N$70 billion shortfall in revenue from taxes – due to the recession – and increased demands for spending was ‘something of a baptism of fire’, he said as he delivered his first Medium Term Budget policy statement in Parliament on Tuesday.All too aware of speculation that his first major economic policy statement would show whether or not he had caved in to the ANC’s allies on the left, Cosatu and the SACP, Gordhan outlined the government’s spending priorities for the next three years that effectively translate into rands and cents the ANC’s election manifesto promises.Watched by President Jacob Zuma – as well as his predecessor, Trevor Manuel – Gordhan demonstrated a pragmatic approach and continuity, but said the South African economy had to be transformed to deal with the structural problems that caused deep-rooted poverty and huge inequality.He said the government would raise about N$640 billion in debt over four years to cover investment in creating jobs, improving education and health care, boosting the fight against crime, and in rural development.This would be done ‘carefully’ so as not to burden future generations. While the national debt – and the costs of servicing it – would rise, borrowing would be reduced as the economy improved.He paid tribute to Manuel – now Minister in the Presidency in charge of the national planning commission – saying this response to the economic crisis would not have been possible without his ‘sound stewardship of our public finances, for so long’.When the economic slump hit, the country’s finances had been in ‘excellent health’. Other countries were borrowing to rescue banks and businesses, while South Africa’s increased spending would build road and rail links, new power stations, housing, water and sanitation.Higher borrowing was ‘the right thing to do’ – but a campaign against wasteful government spending would be ‘vigorously’ conducted.National departments had already identified savings of N$14,5 billion over the next three years, while about N$12,6 billion would come from ‘redundant, ineffective or overpriced activities’ in provincial departments – a total saving of N$27 billion to go towards education, health and infrastructure.’In municipalities and government agencies… spending on unnecessary travel and entertainment, unfocused consultant contracts, procurement supplies at uncompetitive prices and layers of administrative paperwork that interfere with getting the job done will be cut,’ Gordhan said to applause.Pledging consistency in policy ‘while creating room for engagement and review’, Gordhan appealed for a ‘shared compact’ across ‘all the divides in this house and across the nation’.’We will not tolerate corruption. We will act forcefully against wastage. We will insist on value for money for the billions that we spend … we don’t want pickpocketing from the public fiscus. We will… take action against those who feed selfishly off the state.’Echoing US President Barack Obama, Gordhan stressed the importance of shared values: ‘Can we work together to meet five shared, national, social and development goals? Yes, we can!’Revealing that half a million South Africans had lost jobs in the downturn, Gordhan said job creation would be ’embedded’ in rural development, social services and local infrastructure programmes, and called for a ‘new blend of skills development and renewal of schools and colleges’.Adjustments to the 2009 budget included N$562 billion in additional expenditure – N$14 billion up on the February budget estimate – including N$250 million for rural development.-Business Report