Pretoria - Finance Minister Pravin Gordhan's Medium Term Budget Policy Statement (MTBPS) has been welcomed by business, as it shows a commitment to the stabilisation of government spending.
Gordhan tabled the mini-budget in Parliament on Thursday.
"The main message is a commitment to the stabilisation of government spending that will lessen the overall tax burden on the country. The commitment to reducing the fiscal deficit and government debt indicates greater emphasis on fiscal sustainability that could have a positive influence on our credit ratings and foreign investor perceptions," South African Chamber of Commerce and Industry (Sacci) CEO Neren Rau said.
The chamber was pleased with the minister's address.
Gordhan detailed initiatives to reign in the widening deficit and improve the impact of spending by, among other things, investing the balance of resource allocation in new infrastructure.
The minister said the budget deficit was expected to widen from 4.2% in 2011/12 to 4.8% in 2012/13, before falling to 4.5% of Gross Domestic Product (GDP) in 2013/14 and narrowing to 3.1% of GDP by 2015/16.
The National Treasury has proposed reforms that will focus on developing a procurement system that prioritises value for money and that strengthens the fight against corruption.
Sacci said it was clear that the fundamental message was of fiscal prudence to allay fears of unsustainable debt.
However, Rau said Sacci would have liked to see a direct acknowledgement of the impact of credit rating downgrades on investor confidence and foreign funding. "The upward revision of the budget deficit over the medium term partly reinforces the concerns voiced by the credit rating agencies," said Rau.
Rau said the stabilisation of spending through savings and efficiency gains was seen in a positive light as it could indirectly reduce the tax burden faced by business as well as foster a culture of sound governance across the public sector.
Business Unity South Africa (Busa) CEO Nomaxabiso Majokweni said the country's fiscal space was shrinking and that Busa supported a broadly conservative approach to state spending. It was concerned at references in the minister's address to the rising public sector wage bill.
"It is essential that, even with the intention of keeping public expenditure levels within the 2012 budget, the emphasis on infrastructural spending must continue to strengthen the nation's balance sheet," she said.
Majokweni said Busa would have preferred a stronger economic message from the minister but, however, added that it welcomed the extent to which budgetary decisions were being increasingly aligned within the framework of the National Development Plan.
On the issue of private sector participation in infrastructure development, Rau said he welcomed the minister's statement that outside contribution to the infrastructure was necessary. "We would want to hear more on how this would be structured."
Busa welcomed the use of tax compliance as a determinant of good standing when deciding to award a government tender. "This can form an important part in building and strengthening a non-corruption environment," said Majokweni.
Standard Bank economists said: "Overall we believe the MTBPS reassured South Africans and the rest of the world that government is in control of the budget." - SAnews.gov.za
