A great deal was at stake for South Africa when its Finance Minister Pravin Gordhan delivered his much-anticipated 2016 Budget speech. The political stakes for the governing African National Congress are high as it battles charges of corruption and a failure to deliver services to communities. The Conversation Africa Politics and Society editor Thabo Leshilo asked political scientist Keith Gottschalk to highlight the most important elements of the speech, and to assess whether Gordhan addressed the pressing challenges facing the country.

Corruption, spending cuts and education

First, the finance minister announced more stringent procedures for state tenders to ensure that there was transparency in the way they are awarded. This will make predation from “tenderpreneurs” - business people who enrich themselves through government tenders, often dubiously - and “political hyenas” - the country’s corrupt political elite - more difficult.

It has been estimated that funds lost to corruption in South Africa could well have increased to one-fifth of the budget.

Second, the minister announced that the budget deficit will be reduced each year for the next three years.

Gordhan’s formal qualification is as a pharmacist and it’s fair to say that he dispensed exactly the medicine ratings companies and credit agencies are watching for. The cuts on public sector travel, cars, accommodation, and conferences sends the right signals. The freeze on the hiring of public sector workers comprises the bulk of the freeze in expenditure. This will keep the Bretton Woods institutions at bay.

Third, Gordhan announced the two-decade overdue project to ensure that all schools are built of brick, and supplied with water and electricity. He also announced acceleration in the provision of early childhood development schooling. At the other end of the education spectrum he announced a substantial increase in funding for the National Student Financial Aid Scheme. This provides support for indigent students at colleges and universities.

Skillful tax hikes

Fourth, the finance minister committed to unspecified reductions in the cost of doing business, and regulatory challenges that deter investors.

Fifth, there is no increase in VAT. He took this decision in a year in which working class families will be hit badly by inflation as food prices rise due to both the drought and the decline of the rand’s exchange rates.

Instead, Gordhan fell back on that favourite of the Dutch East Indies Company - excise duties. New levies on sugar and tyres, and higher levies on fuel and plastics.

Overall, his team has skillfully cut expenditure and raised taxes where it will hurt least. The paragraph seeking to rationalise and privatise certain state-owned enterprises will help concentrate the mind of South African Airways, the troubled national airline.

The budget reflects a great appreciation of the challenges confronting South Africans. There is a good mix of macro and micro-economic strategies aimed at ensuring the country survives economic uncertainty, restores investor confidence and achieves some level of growth.

What I would like to commend the most is the fact that curtailing expenditure is more focused on the state than the general public. This ranges from reducing the huge state wage bill, travel and accommodation, to politicians' vehicles. This coupled with the R5.5 billion income tax relief shows a genuine care for the general public and taxpayers who are already squeezed by the rising cost of living.

The impact of the R11.5 billion increase in social grant spending cannot be overestimated. The payments are the only income source keeping some families above what Statistics SA calls the food poverty line.

Investing in growth

The R2 billion investment in the New Development Bank is sensible as Africa becomes an increasingly important destination for South African exports.

While attempts are being made at curtailing expenditure and reducing the budget deficit over the Medium-Term Expenditure Framework, these do not translate to less spending on enabling economic infrastructure.

The planned R292 billion in inter-modal transport and logistics networks will improve South Africa’s competitiveness, especially if marginalised centres like the Eastern Cape are accommodated.

There is one shortfall. The budget in general fails to establish targets to achieve inclusive growth - something the minister talked about in his speech. This is despite the fact that the Industrial Development Bank has earmarked R27 billion out of R100 billion to be spent on black industrialists.

More direct transformation targets across all investment and expenditure sectors are critical to drive a truly inclusive economy. The government needs to be bolder in ensuring that black South Africans participate in the economy through procurement as well as investments.

Written by Keith Gottschalk, Political Scientist, University of the Western Cape

This article was originally published on The Conversation. Read the original article.