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S.Africa budget pushes redistribution amid power struggle

Published on 22/02/2017

South Africa's finance minister warned Wednesday of "growing impatience and ferment" over post-apartheid inequality and slow growth as he presented a budget that raised taxes on the wealthy.

Pravin Gordhan said his budget was “highly redistributive to poor and working families”, stressing the challenges posed by South Africa’s unemployment crisis and its poor education system.

He announced a new 45 percent income-tax rate for people earning more than 1.5 million rand ($115,000) a year, up from 41 percent, and vowed to crack down on tax avoidance.

GDP growth in South Africa was just 0.5 percent last year, while 35 percent of the labour force is unemployed or has given up looking for work, and the mining and manufacturing sectors lost 80,000 jobs in 2016.

Gordhan — who is widely respected by international investors and ordinary South Africans — has been at loggerheads with President Jacob Zuma over control of the treasury, and Zuma loyalists have tried to oust him in recent months.

But his budget echoed Zuma’s recent pledges to bring “radical economic transformation” to South Africa, more than 20 years after the end of white-minority rule.

“Economic growth is slow, unemployment is far too high and many businesses and families are under stress,” Gordhan said.

“The relationships between labour and capital, rich and poor, black and white… still reflect the entrenched legacy of colonialism and apartheid.”

– On borrowed time? –

Gordhan last year faced fraud charges that were criticised as a move to oust him by Zuma’s associates. Political turmoil within the ruling ANC party spooked investors and saw the rand plummet.

The charges were dropped at the last minute, exposing deep tensions in the party as several ministers came out in Gordhan’s support.

The ANC youth league, women’s league and its military veterans association have all called for him to resign.

In a press briefing before the budget, Gordhan hinted at the power struggle with Zuma, saying that “there are institutions that you don’t mess with and the treasury is one”.

“It takes a long time to build an institution but a very short time to mess it up,” he added.

Gordhan’s future came under the spotlight again ahead of the budget, with speculation of an imminent cabinet reshuffle to axe him — a step likely to trigger another crisis of confidence in the markets.

Uncertainty increased last week with the announcement that Zuma ally Brian Molefe, the former chief executive of the state-owned power company Eskom, was heading for parliament as a new lawmaker.

“You don’t bring someone of Molefe’s calibre into parliament just to make him a backbencher,” political analyst Mcebisi Ndletyana told AFP.

In a briefing note, the Eurasia Group consultancy said “the divide pits Zuma and his allies who wish to transfer ownership to themselves — the patronage network — against those who are pushing for a more interventionist state”.

Gordhan was appointed in 2015 to calm panicked investors when Zuma sacked two finance ministers within four days.

The ANC party recorded its worst-ever election results in local polls last August.

It is due to choose a new leader at the end of this year, ahead of the 2019 general election when Zuma must stand down after serving two terms.