Editorial: Economy needs work

President Cyril Ramaphosa presented an ­optimistic state of the nation address last ­Friday.

However, the budget speech presented by ­Finance Minister Malusi Gigaba on Wednesday was sombre, reminding us of the hard work ahead.

Government needs to sort out a number of things to get the economy going, including corruption, theft and unauthorised expenditure, which runs into tens of billions of rands. Ramaphosa has promised to ­tackle this, but it will take time.

Another thing that will set our economy on the right course is to cut unnecessary expenditure and to do things more efficiently.

This week’s budget speech relied heavily on tax hikes, mainly the one percentage point increase in the rate of value-added tax, and expenditure cuts of R85 billion.

However, the expenditure cuts were offset by a R57 billion increase in tertiary education spend for poor and lower-income students.

Another thing government can address is the high increase in public sector wages.

Right now, government is budgeting for public sector wages to rise by 7.3% over the next three years, compared with the average public sector wage settlement from the 2011 tax year to the 2018 tax year of 8.5%.

Consumer inflation is at 4.4%, so a real ­increase in wages of almost 3% will be realised.

Given the stagnant growth, it is time for public servants to adjust their wage expectations so that increases are much closer to inflation.

In the private sector, you are lucky if you get an inflation-based increase.

Public sector wage increases at inflation will save the country tens of billions of rands in expenditure and will mean that there will be less pressure to hike taxes.

For far too long, National Treasury has been too ­reliant on tax hikes and increasing debt to balance the books.

A person of integrity is required for the position of finance minister.

A cloud hangs over Gigaba ­because of his ties to the Gupta family and allegations against him related to state capture.

Gigaba this week said that untested allegations don’t matter when it comes to the probe into state ­capture, but what matters is “that little thing called the facts and the truth”.

However, there is overwhelming public evidence of Gigaba’s involvement with the Gupta family and state capture, and he is going to have to spin quite a yarn to explain all that away.

Ramaphosa needs to install someone with the right credentials to the position so that the country can rest assured that all decisions related to our economy, taxes and money in general are made with the best interests of all South African citizens at heart.