Pretoria - Finance Minister Pravin Gordhan's 2011 budget reinforces government's commitment to job creation and the relief of poverty, law firm Deneys Reitz Attorneys said.
"The minister announced a budget which reinforces commitment to job creation, poverty relief and capital expenditure aimed at upgrading infrastructure in the country," the company's analysts said.
Gordhan delivered the budget in Parliament on Wednesday afternoon. The minister said the R9 billion jobs fund would co-finance innovative public and private-sector employment projects over the next three years.
Of the main tax proposals announced in the budget - which include a tax relief of R8.1 billion, a new tax to be introduced on gambling winnings of above R25 000 - Deneys said the minister had little room to manouvre because "the economic environment is still one which can be described as austere".
Meanwhile, Old Mutual's Rian le Roux said higher budget deficits announced by the minister [5.3 percent in 2011, 4.8 percent in 2012/13 and 3.8 percent in 2013/14] were rather unexpected.
"This was a surprise move, as most economists expected lower budget deficits due to higher-than-forecast revenues this year. It is, in fact, a bit of a shock, in that it raises the question whether government will not be forced to do the same next year and the years following that, or alternatively, eventually be forced to raise taxes substantially in order to regain control over the deficit," explained le Roux.
"The good news, however, is that the three-year projections still call for a decline in the deficit, and that, compared to many other countries, the deficits and current levels of government debt are still relatively low.
"They have also been very transparent in announcing the expected higher deficits, rather than attempting to cover them up (like some other countries have done), which investors could interpret positively. So the markets may forgive this slippage for now, but will not do so if it were to be repeated again next year and thereafter," said le Roux.
Government's decision to support social spending and priorities such as job creation, skills development and infrastructure to spur economic growth, including R8.9 billion for social security benefits, have merit in the short term, and job creation in the longer term cannot be raised by government increasing its claim on the country's resources, said le Roux.
"Reigning in the size of government, lowering the tax burden and creating conditions for the private sector to thrive is the only road to long term growth and employment success."
