Wednesday, 17 February 2010

No big scares in budget speech

(Social Justice South Africa)

Analysis by Marc Aupiais

I have been watching with some concern, the budget speech by the new Finance Minister, in the job since 11 May 2009: to give some information on how I see the man:

Pravin Gordhan, is a pharmacist by education. He has been quite involved in tax and finance prior his appointment as Finance Minister, under the then new Zuma administration. Requests for the nationalization of the massive mining industry, do not seem to have been listened to, allaying some jittery fears, brought on by statements of ANC officials. The reserve bank, which ANC tripartite ally COSATU has had quite a bad relationship with, the Minister insists must remain independent. He was involved in the ANC's plan for implementing the Constitution of the Republic of South Africa, 1996, which is also a good sign. His work with the Communist party in the past, has not seemingly haunted the long time tax man, who was brought in to replace Mbeki era Trevor Manuel.

Perhaps I misheard, but I didn't hear anything on ridiculous ideas for a national health insurance plan, perhaps the disaster of such an unsustainable policy has been thwarted for now. Perhaps the USA's rejection of such a plan in their own country, has spared South Africa such foolhardiness. Public Debt, seems to be raising to 40% from about 23%, which is of concern. The extension of the levy on petrol (gas for our North American readers), certainly will affect some drivers. While I was watching Summit television, which is the (financial) network which I do prefer to watch out of the South African news services, when it comes to finance, it was noted, that the state of South African roads is a concern. Drivers are taxed, but roads have largely fallen into disrepair, with costly, and deadly pot-holes and other hazards becoming more and more common for drivers in their daily journeys.

I wrote a bit of additional commentary on my Hurricane and the Tempest blog, which while independent: is, with my permission: a commentary column on the South African Catholic website, for news, whom I am writing this article for, with permission, I am placing a quotation of that commentary here:

"Pravin Gordhan, who replaced Manuel, seemed the last time we checked to be continuing his monetary economic policies. Suggestions that mines must be nationalized, and other braying from the ANC's leftest allies has yet to yield the fanaticism some predicted under Zuma, whom they had brought to power. Granted, the ANC, has always refused the desires of their communist allies when it comes to requests for the nationalization of mines. The Finance Minister has noted that investment is important to South Africa. Gordhan, has warned of the economic crisis, and claimed it may bite again. He has noted he expected vast changes in global financial markets. He has also made note of claims of those who say that South Africa is not as competitive as others on job creation. He has emphasized a labour intensive economic growth path, which may be wise in a country with such skills shortages, and where the ANC continues uneconomic societal engineering projects such as BEE and BBBEE and AA, which do not afford the most skilled South Africans jobs or education first. Continuing the ANC tendency to cut the cake more finely, he has noted plans to give businesses subsidies if they hire inexperienced youths out of schools. The Subsidies would allegedly be over a two year period, presumably after the hiring took place.

The Finance Minister has emphasized the need for an independent reserve bank, and emphasized the need for pragmatism. He quoted Business SA, and COSATU, both of which I would believe are Zuma allies. His policy, so far, and I have not watched the end of his speech, seems quite similar to past policies. Promises of job creation, do not seem likely to myself. From the expressions of the President and others, I do not expect the speech was unexpected to them.

I certainly don't expect many changes in this budget, but I have yet to watch the speech to the end. it seems inflation targeting goals also remain similar.

This article should not be relied on as any form of financial advice!"

I have further copied what the government has to say about the finance minister, here:

Keeping with the topic on hand:

It does not seem that there are any big surprises, although, if the public debt is not kept down, or if more taxes are not raised, due to economic growth, there may be some need of careful financing by the government. It was suggested, that this speech was more a State of the Nation Address than that of sex scandal embattled president Jacob Zuma. The feared policy changes due to the president's allegiance with the far left, still seem like storm clouds hanging over South Africa, but with this budget speech, possibly, the nation may be able to stave off the rain. The relative leftest policies of tax the rich to feed the poor, and some neo-socialist policies, which have existed for a while, continue to exist in the current budget, it would seem.

As noted in our disclaimer, this article, like all our articles, does not constitute financial advice. Rely on this information and all our information at your own risk.

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