Today, many who worshipped Mbeki and Manuel find it fashionable to knock them at social occasions. Few dare ask where we would be without them.
The national budget speech on Wednesday will not hold much cheer. Some will blame apartheid, others will blame Mbeki and Manuel for our current lousy economic lot. Few will count their lucky stars.
Mbeki and Manuel ran SA on a Scottish budget in the good times. Real growth rates of above 4%, coupled with inflation, drove up tax collections by 10% a year. Hence the country clocked up minimal national deficits in the five years leading up to the global credit crunch.
By 2008, the total national deficit dropped to below 25% of GDP. Then came the hard times, Polokwane and a new political order, and a deficit heading back towards 40%. (Still not so bad: compare with Greece at 170% , Italy 120% and Japan at over 200%.)
Had Mbeki and Manuel opened the national expenditure floodgates, we would be in an economic crisis by now. Investment ratings would have been downgraded. Inflation, interest and tax rates would have soared. The rand would have crashed.
This week, PG will wrestle with lagging tax collections. VAT is of particular concern as the consumer sulks at home trying to balance a monthly budget with 30%-plus increases in energy prices and a lot more to come.
National expenditure will exceed R1-trillion in 2012/13. Funding Zuma’s R300-billion spend on infrastructure over seven years will be insignificant compared with the annual costs of social security, education, protection and healthcare. That’s R600-billion a year!
PG’s options are limited. He cannot increase the national deficit by much for fear of a downgrade by investment ratings agencies. Individual taxpayers are already experiencing a tax overload. Corporate profits are just not there.
Sin tax on booze will inevitably go up to R1 a shot; cigarettes by R1 a pack. All excluding VAT. Heaven knows what will happen to fuel and electricity prices. But don’t grumble. Rather toast your last pre-budget dop. With 50 million people and all our problems, we still get by.
Originally published in the Sunday Times Tax Talk column.