For months we have been entertained with poor economic data undermining fiscal prospects. For weeks we have been threatened with a sudden Gordhan dismissal undermining the national interest. In the end, no doubt, we were hanging by a rapidly thinning, raveling thread.
But it turned out to be a steel cable after all as finance minister Gordhan survived to read his medium-term budget statement to parliament, laying out how the budget spending (and taxes) will be changed these next few years for minimal erosion loss in the deficit and debt promises to the nation, markets and the rating agencies. And so onwards to the next instalment of this SA soapie ...
I can't now remember which January it was (2014?) being far too lazy, thank you, to reread through so much exciting stuff, but it was in a State of the Nation address when President Zuma suddenly sounded quite menacing (to my over-sensitive ears?) when saying that the finance minister had to look for additional resources to fund the state priorities. What was that? Higher taxes, no matter the state of the nation, the government priorities would prevail?
By now three years along, and a good deal wiser, one hopes, these words take on even more meaning than they had at the time. It was a gauntlet thrown down. And it didn't quite come off, now did it? But what an economic mess along the way, despite all the achievements claimed ...
So now we face the reality of 0.5% GDP growth this year, and possibly 1.7% next year (but no one yet knowing how to do it?) That simply isn't enough to allow the government to maintain its planned 7.6% nominal spending growth (ahead of 5-6% inflation but historically very low in real terms.)
Unprecedented, to prolonged parliamentary applause, for clearly he had survived this long to make the budget statement in person, Gordhan proceeded to tell us the budget numbers, and how we should respond in coming days (and years) if we know what's good for us, all of us.
Gordhan faces a 3.4% of GDP budget deficit this year (up from 3.2% expected) which he lowers to 2.5% by 2019 (up from 2.2% previously.) Bear in mind that the rating agencies always assumed only getting to 2.5%-2.8%, so that is still within range.
So is the projected net debt ratio topping out and averaging 48% of GDP, up from 46.2% projected in Feb. So higher, but still reasonably constrained.
To achieve this (brace yourself, please) the budget is to be restructured by R70bn these next two years (2017-2018) 2/3 by way of higher taxes (R43bn) and 1/3 by lowered government spending ceiling (R26bn.) The wrong (inverse) ratio? A part of this higher tax take was already projected in Feb budget (for instance, no compensation for fiscal drag on income tax?) But there will be surprises next Feb, and four months ahead to worry and speculate about it.
What was unprecedented about this budget statement was the non-stop endless Gordhan warnings, delivered with great vehemence and passion, that we need to stand together or assuredly hang separately, though the finance minister was far more elegant about it. Speaking from the heart, the writing is clearly on the wall. And all those parliamentary faces, especially in ANC ranks, deep in thought. For which buffalo to back - the wounded one more than once mentioned and the pride of lions ready to pounce. Go hungry, or worse? Or do the right things, and flourish?
Nobody really understands where the growth revival will come from, with the state belt tightening, burdening the taxpayer (no further interest rate increases, please) and trust in all this in the business sector at a very low pitch. Wishing private trust and confidence to revive is nice, but then do the necessary.
So what stood out?
Gordhan achieving a compromise of goals, such as ensuring financial stability (mainly via the taxpayer) spending considerably more on university education, and agreeing to the nuclear deal, confirming Eskom will take the lead in nuclear power initiative, with Treasury ensuring scale and phasing in the best national interest, and procurement transparency and compliance within the law.
Who got the most here, and what did Gordhan get, or does all of this very much represent him too as old ANC stalwart, as he clearly signaled? And so it was the taxpayer that was invited to take the biggest fall. Make no mistake about this government and where its ideological preoccupations rest.
Gordhan warned endlessly economic and tax revenue growth is far too low and has to revive, telling everyone to stand together or face a very unpleasant reality next. Yeah, that's a worry. For nobody really understands where this will come from, except commodity prices mildly reviving and farm drought ending. There is no change in government paradigm anywhere to be seen. And thus we carry on (indeed some Up the Khyber, as we are used to by now.)
A few students outside parliament protesting volubly, burning rubbish and provoking police. A bigger worry, because there is no indication of this going anywhere yet.
This is hardly over? Which will make 2017 even more interesting, succession politics the elephant in the room. You could see, touch, smell that today ...