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Gordhan's mini budget announcement

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Old 10-23-2013, 04:33 PM   #1
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Pie Chart Gordhan's mini budget announcement

All eyes will be on Finance Minister Pravin Gordhan and his briefcase, when he walks into Parliament to table his last Medium Term Budget Policy Statement of the current administration, before Parliament, today.

Dubbed the mini budget, Gordhan’s speech – like his previous mini budgets – is expected to grab the attention of the financial markets with fine tunings that will bring about certainty to the government’s economic and fiscal policies.

The mini budget comes at the back of stagnant growth that according to the Reserve Bank, has been brought about labour unrests and domestic production stoppages.

But despite these challenges, Gordhan is not expected to make sweeping announcements, but to rather stick to his winning formula – implementing the National Development Plan (NDP) – the government’s vision to eradicating poverty, improving the quality of education, health care, creating jobs and to pronounce on bulk investments in infrastructure.

When Gordhan walked into Parliament to present his first mini budget in 2009 – the first of President Jacob Zuma’s administration – times were tough.

The country and the rest of the world had just suffered a major blow due to a deepened recession, with an estimated 1 million South Africans losing their jobs when employers rolled out massive retrenchments in response to the global crisis.

At the time, Gordhan’s main aim was to introduce immediate remedies to soften the job-loss blow, which included re-skilling retrenched workers and extending support to industries that were in distress or going through retrenchments.

With exports going down at the time due to the crisis, and the economic outlook being revised downwards due to a global slowdown, Gordhan saw a need to shift the government focus to vigorous infrastructure investment in a bid to ride the recession tide. This also necessitated borrowing.

Gordhan also announced austerity measures – instructing government departments to tighten their belts by avoiding wasteful expenditure like “golf days” and taking a tough stance on corruption.

Gordhan also told Parliament that there was a need to review how the government worked, from upping service delivery to fiscal policy reforms.

Fast forward to two years later, in 2011, the NDP, chaired by Minister in the Presidency Trevor Manuel, produced the NDP – the country’s vision that set out to robustly deal with structural economic challenges brought about by apartheid policies.

This plan, which has now been adopted as policy, aimed at strengthening municipal finances and investing in urban infrastructure; promotion of special economic zones for industrial and export opportunities; accelerating the creation of youth employment opportunities and improving living conditions in informal settlements, including mining communities.

It also set out to expand exports, especially to emerging markets, and realising investment opportunities in Africa.

At the back of this, and many other fiscal and monetary policy reforms that the National Treasury and the Reserve Bank have overseen, Gordhan rode the tide and did what needed to be done to turn things around and ensure that Zuma’s administration did not suffer deeper wounds due to the after effects of the recession.

His 2012 mini budget focused on the NDP priorities and outcomes and set the scene for his main budget announcement in February.

The progress that Gordhan has made, and how he instilled confidence in emerging markets through partnerships with emerging economies like Brazil, Russia, India and China – known as BRICS – earned him a lot of respect. So much that he was recently named Sub-Saharan Africa's Finance Minister of the Year by emerging markets for his tough stance on fiscal discipline.

"The prudent fiscal policy led by Pravin Gordhan, who became finance minister in 2009 at the height of the global economic crisis, has been praised by analysts, especially since South Africa is more exposed than other emerging markets to dangers stemming from an eventual pullback of quantitative easing by the Federal Reserve," read the citation by Emerging Markets.

Lastly, South Africa is an active member of the G20 major economies, and after the recent Russia meeting, G20 leaders signed a St Petersburg Action Plan that called on South Africa to: “centralize the prudential supervision of financial institutions, enhance protection measures for financial consumers and expanding the scope of regulation to include credit rating agencies...”.

With the Cabinet having already approved a policy granting black-listed consumers credit amnesty, it remains to be seen what other announcements Gordhan will make today. –
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