Budget moves away from tax and spend

The words of Harvard economist the late Martin Feldstein, who served as chairman of the Council of Economic Advisers and as chief economic advisor to President Ronald Reagan, are worth recalling at this time in South Arica’s development.

Increased government spending can provide a temporary stimulus to demand and output but in the longer run higher levels of government spending crowd out private investment or require higher taxes that weaken growth by reducing incentives to save, invest, innovate, and work.
Government and ANC ideology are a perpetual constraint on business.
Take mining for example, the flywheel of this economy. Electricity is the number one issue. The Mining Charter, transport and exploration are second-order issues. Instead of acting, we score more own goals.
Ahead of the budget there were many key questions for the market.
Revenue receipts were going to come in well ahead of previous expectations. A consensus view. And anything around the R100bn level would be taken positively, and it was just under that.

But it was also about what we do with the money. Would the Minister use this windfall to meaningfully address our rising debt trajectory? Would we see a meaningful longer term shift lower in the primary budget deficit and debt to GDP metrics?

Michael Avery spoke to to Annabel Bishop, Investec Chief Economist; Peter Attard-Montalto, head of capital markets research at Intellidex; And Keith Engel, the Chief Executive of SA Institute of Tax Professio