Political and economic attention has moved to Finance Minister Pravin Gordhan’s budget, which will be tabled in parliament on February 27. This will take place against a backdrop of sluggish growth, a widening earnings gap and turbulent labour relations in the mining sector.In the Mid-Term Budget Policy Statement last year, Gordhan forecast a deficit of 4.5% of Gross Domestic Product for 2013/14. But Fitch Ratings cut South Africa’s sovereign credit rating to Triple-B from Triple-B-plus in January, citing rising social and political tensions and the inability of the government to implement effective reforms.Delivering his State of the Nation Address, last night, President Jacob Zuma said the Finance ministry will review its tax regime this year. He said the review will include having another look at mining royalties to ensure that government raises sufficient revenue from the economy.Financial markets also reacted favourably to plans to tackle labour problems and economic growth, as a result, the currency strengthened by 0.9% immediately after the speech.Both business and labour appeared to have been encouraged by the President’s acknowledgment of the partnership between themselves and government. They say this union is key to delivering solutions to economic challenges.Business is satisfied that the address recognised the many obstacles faced by business, but is concerned about tax issues raised and the lack of detail on how investor confidence will be rekindled.Labour too has said it’s pleased with the frank approach taken by the President on the current challenges the country faces. But it said the speech was thin on detail on how to tackle youth unemployment. Analysts on the other hand said attempts to please both labour and business may be a problem for government.
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