It was quite a week for numbers. The GDP
figures for the last three months of 2103 were published on Tuesday followed of
course by the 2014 Budget on Wednesday afternoon. There was, however, very
little unexpected in this daunting blizzard of statistics, some of which contain
only a residue of reliability. For example it is hard to understand why a
sector like manufacturing can report such enormous changes in business from one
quarter to the next. In 2013 the four quarterly quoted growth figures for this
sector were -7.9%, 11.7%, -6.6% and 12.3%. It was this last number, together
with an equally puzzling 15.7% from mining which lifted the overall growth to
3.8% for 4Q 2013 that cued murmurs of satisfaction from some commentators.
Actually it is a shockingly low number and the country will probably soon wake
up to find that those self-important rating agencies have dished out another
downgrade. For those of us not actually seated in front of the levers of power,
the problem and its solution appear to be very clear. Simply the state is way
too large and way too involved in affairs in which it has no skill, experience
or business.
This was emphasised by the Budget where
the hapless Minister Gordhan finds himself with absolutely no wiggle room. His colleagues
have utterly failed to respond to any pleas that they should curb their
spending which this year in total is planned to rise by 9% to R1.25trillion. By
his own admission the president is unable to grasp such large numbers and seems
to hope that the electorate is also hazy on what this means.
Individual items on the expenditure
schedule which catch the eye include R178bn for Basic Education from which the
nation appears to extract precious little value. The government will pay
interest of R115bn on the debts it has incurred by running a deficit for so long.
This amount is almost 14% higher than last year and is certain to get far
larger in the future because of the continued shortfall between spending and
income. This year the state will need to borrow 21 cents for every rand it
spends. Only the most optimistic of us
would run our household budgets like that. Expected further interest rate rises
and perhaps a ratings downgrade will seriously exacerbate matters for Gordhan.
On the income side of the budget it is
fun to note that the total income tax the minister expects to collect from the 287 000 individuals with the highest taxable
incomes, exactly matches the R137bn that
the government will distribute to the 15.8 million social grant recipients. At
just over 1% of total expenditure this hand-out is probably money well spent
and makes a significant difference to many lives. However, this juxtaposition
highlights the fragility of the fiscal model. An analysis published in the
Budget reveals that for every one of these top bracket individuals who emigrates
or falls off the taxman’s list, at least five from the next bracket are needed
to replace the lost tax revenue. The country is very low on golden geese.
But, no worries. The market is making us
richer. No one can remember what it was that scared us so much in January and
brought the bear out to see what all the noise was about. February’s All Share
performance will be around 5%. Most of the companies reporting so far this
season have delivered reasonable results. The budget was of concern only to the
detail geeks. That nice little old lady Janet Yellen at the Fed seems so much friendlier
than Helicopter Ben Bernanke. She has made the dollar weaker which means our
own rand is looking perky. Party time again.
But now the serious stuff. The third test
versus the Aussies at Newlands with the rubber at 1 all. Eish. It is going to
be a tough five days. At least on Saturday we get relief from the tension by
watching the Lions give the Bulls a rugby lesson.
James Greener
27th February 2014
