Gordhan faces double whammy

CAPE TOWN – South African Finance Minster Pravin Gordhan will be forced to change some earlier forecasts of his 2010 budget, but far from being evidence of a leftward lurch, these will be moves to adapt to the prevailing economic climate, economists said.

‘We must be careful when policies are adapted not to read too broadly into them,’ said Econometrix economist Tony Twine. ‘After the 2009 election the ANC promised there would be no change to economic policy. So far, they have kept their promise.’Twine emphasised that Gordhan finds himself in a difficult position as he prepares to present his budget to parliament next week.Aside from having to deal with a substantial budget deficit and severe recessionary effects, President Jacob Zuma’s administration is under pressure to deliver the kind of expansionary budget the ANC’s alliance partners have been calling for.Cosatu spokesperson Patrick Craven is quite clear about the fact that the trade federation will not tolerate the ‘global economic crisis’ being used as an ‘excuse’ for watering down the bold promises made in the ANC election manifesto.’The economy needs an expansionary budget. Debt to GDP is low and increasing public debt will be accepted by the markets,’ Kantor said. ‘Risk spread on South Africa’s foreign currency debt is also low.’Kantor also expects Gordhan to make a ‘concession to fiscal conservatism’, which will go down well with the ANC’s left-wing alliance partners. – Fin24