Great expectations, but not tough enough

According to analysts and the general market reaction, Finance Minister Pravin Gordhan’s 2016 budget speech failed to impress. Economist Mike Schussler said that while markets anticipated a tough budget, more private partnerships, privatisation and cuts on social grants were expected.

Instead, Gordhan added a R11.5 billion social grant allocation over the next three years. The rand fell 20 cents to the dollar in reaction to the budget, but more importantly, says Schussler, expectations were not met.

“Expectations were for some privatisation, even if just the Telkom stake that government still owns or some other smaller public enterprises.” Attempts to cut the “enormous” government wage bill by Gordhan were ineffective, according to Schussler.

“This will still mean an increase in the wage bill. The wage bill is still expected to increase 7.4% and will increase more probably as it has done every year. Even at 7.4% average over the next three years, it is above the expected inflation rate. The bill is already very large and one of the highest in the world when compared as a percentage of GDP,” he said.

Meanwhile, those with big expectations on the education front were left high and dry, according to Equal Education secretary general Tshepo Motsepe. “In essence, we have a budget speech that does not speak to the problems facing us. The problem with basic and higher education is the infrastructure.”

He also criticised the minister for only addressing the education crisis as a social issue. “They are now taking C-students for financial aid and that tells us we are headed towards a crisis,” he said.

Gordhan announced an additional R16 billion would be allocated to higher education over the next three years through reprioritisation of expenditure.

“It is clear that basic education has suffered as a result of money being reallocated to higher education and that is one of the problems,” Motsepe said.