Subsequent to the State of the Nation Address by President Zuma in early February, many South Africans eagerly awaited the delivery of the Budget Speech, which was delivered by Minister Pravin Gordhan on the 25th February 2016.
With various banking and major vehicle brand sponsors in partnership with MANCOSA, a post Budget Speech Breakfast was hosted at the institution’s Durban Campus. The panel of speakers consisted of specialists in tax and economics fields, and incorporated a brief political analysis by the senior editors of The Mercury and Sunday Tribune newspapers.
Dr Zaheer Hamid welcomed and outlined the importance of MANCOSA hosting the Post Budget Speech Breakfast annually, and introduced the panel of speakers who consisted of Professor Dilip Garach, Advocate Lavan Gopaul and Mr Fikile Moyo.
Professor Garach identified in his opening statement that some commentators considered the Budget Speech a non-event. This was due to the non-mention of tax increases, vat increases, capital gain tax increases, indirect tax increase, foreign exchange, backdoor trading and privatisation. He then went into an in-depth analysis of the economic status of the country, where he emphasised that the country is in a deficit status. Professor Garach’s closing slides depicted his predictions for the budget spend in 2016; the continuation of the Rand weakening throughout this year, resulting in a rise in inflation and the reserve bank increasing interest rates eventually follow-on to a shrinking economy and rise in job losses. This ultimately left the question of whether or not South Africa will be facing a recession in 2016.
Advocate Lavan Gopaul touched further on the deficit South Africa is currently experiencing and said that Minister Pravin Godhan now has the difficult task of keeping the deficit under control. From a market analysis perspective, Advocate Gopaul noted that during the delivery by the Finance Minister, the Rand dropped by almost fifty cents more and interestingly at the same time, rating agencies downgraded Brazil debt to junk status. On the up side, the South African bond market did sell off quite sharply. The reason being was that there was far too much conservative fiscal policy. A final breakdown with regards to income versus expenses for the budget for 2016, relates to the minimal amount of money that Minister Gordhan receives from the tax payers to fund the exorbitant expenses that have been acquired by the country. He concluded by saying that South Africa needs to improve its need for gaining international investors to avoid the country reaching “a junk status” which translates automatically to the cost of borrowing based on three pillars: a credible fiscal stance, re-enforced central bank independence and respect for all other independent institutions.
Touching on a brief political analysis, Mr Fikile Moyo’s speech was centered on the reactions of the parliamentary parties’ throughout the Minister’s delivery and commented that the Budget Speech should be open to areas that affect the entire society of South Africa and not just certain clusters of the South African society.
In concluding the programme, an interactive question and answer session helped clear up many of the audiences’ uncertainties around the country’s spend for 2016.