My humble opinion? The Budget was a good one.
Flowery finmin Gigaba and his new President have inherited a mess from his predecessor. Whichever way you cut it, the Budget needed to make the best of a bad situation. We cannot but wonder how the estimated R700bn [per Pravin Gordhan’s estimate, I read] corruption and wasted expenditure could have helped at a time like this. I wrote a while ago about Opportunity Cost and the cost of the Zuma era. Added to the number, triple the cost as my guesstimate. Say, 600 people right at the top of the corruption food-chain, 500000 people waiting for direction and wondering what the hell is happening and R1trillion in corporate investment-in-waiting with all its employment potential, and you have a sense of what anything that looks like state capture or parallel-government means. It bears repeating that if ever you wondered if South Africa has a strong economy, look at the beating it has taken and that it has not utterly collapsed is a miracle. But, if I take Eskom as an example, if ever we were taken to the brink, to the edge of the abyss for the economy, then the last 10 years have taken us there.
Little wonder that Zwelinzima Vavi as a trade unionist looks into the numbers and says the Poor have been made to pay for the sins of the past. Simply put, the increase of VAT was unnecessary. We could have dropped taxes if our economy had been able to rise with the tide of favourable World growth that has occurred over the past 3-4 years. But instead, we find ourselves in a bailout of epic proportions and fighting the winds of downgrades. What a waste! And, tragically, what a long way back – Pravin said 10 years off full junk status so I hope that we are spared by Moodys and that Pravin exaggerated a little. No wonder CR takes Trevor Manuel for runs in the morning – “How did you do it back then, Trevor?” must be the question between pants for breath. But another point I have made is that I believe we can turn this around quickly in economic terms, given the goodwill that exists towards this great nation of ours. With boards like Eskom’s, the National Development Plan spoken about, implemented and measured, SASSA and its like taken off the agenda by sound execution, the appointment of a credible, competent Cabinet, good service delivery to our People, the renovation of municipal essential services, the courage to cut government expenditure and programmes that open 100000 small businesses, we would not recognise ourselves in 5 years’ time. Negativity will never get us there; Optimism will – begin to Believe, my reader!
So the technicality of the Budget in broad brush strokes after you’ve read so much already:
- 1% VAT increase equals R30bn
- Estate Duty rise to 20% equals a few Rbn
- Sin Taxes and some excise duties etc equal a few Rbn
- And, Fuel increases equal a few Rbn.
The first and the last directly, tragically affect the Poor.
In exchange for our money, we get:
- Expensive petrol
- More, but not enough, money for education
- Free tertiary education for students whose parents earn less than R350000 per annum which equates to 75% of the student body
- More security
- Money for drought relief in disaster areas
- A reduction in the Deficit over 3 years.
We don’t get SOE bailouts, nor competence in municipalities, nor reduced government costs nor spare change for corruption. The margin of error is very tight and no stone can be left unturned if we are to make this year count as a springboard for sustainable economic growth. The 1.4% is good but I must say, I believe we will see closer to 1.8-1.9% this year. Despicably, one of the best things we could hope for is early successful prosecutions of corrupt individuals who have stolen Rbn’s from us. The role of civil society and the courts would receive much-earned accolades when successful convictions occur. In the meantime, we don’t need to put our fingers down our throats to be sickened by the fugitives of justice and those allegedly guilty stare out from certain seats of parliament. I’m reminded of a comment Jack Welsh made when questioned about retrenchments he undertook in turnarounds. Known as Neutron Jack because he took out people and seemingly just left the buildings, he said “he should have cut deeper the first time.” This would have avoided much more pain. Horrible thought, but he experienced that if a company was suffering from bloatedness, doing retrenchments “deeply” avoided protracted uncertainty and pain as more was often required down the line. Extremely harsh, but Mr President, he may have a point for you to take.
All of the above said, the property and finance market should improve noticeably over the next two years. We’ve become accustomed to shocks just as we say that but hopefully, we have seen the last of those, at least, those we can control. At Homeloan Junction, we have put our heads down in the past few years and enjoyed the success that Focus brings. We intend to do more of the same and to do more of it with those of you on Team. They say all the boats rise when the tide comes in. Naturally true, but we’re not boats, we’re people and we can rise disproportionately given our individual effort and consistent application. We stand by to assist in that process, to be there in the tough and clinking glasses when the success comes. Don’t allow anything to hold you back from the success you deserve; You’re Worth It!
Yours in Property.