KZN business welcomes budget, but not fuel hike

2010-02-18 00:00

ORGANISED business structures in KwaZulu-Natal welcomed Finance Minister Pravin Gordhan’s first budget speech yesterday, particularly the announcement of concrete plans to promote job creation among the youth.

However, Gordhan’s warning that the government may resort to hiking tax rates in the future in order to fund its spending commitments was met with concern in some quarters.

Gordhan acknowledged that employers are reluctant to hire inexperienced work-seekers and that some bargaining arrangements push up entry level wages, pricing out inexperienced work-seekers.

The government will introduce a subsidy in order to lower the cost of hiring young people without work experience, possibly in the form of a cash reimbursement to employers for a two-year period.

Andrew Layman, CEO of the Pietermaritzburg Chamber of Business (PCB), said Gordhan struck a sensible and sensitive balance with regard to fiscal policy.

“While there is a clear commitment to the achievement of a developmental state, this is to be done within the context of economic growth, a reasonable tax regimen which, under the circumstances, might have been adjusted to the disadvantage of tax payers, and a continuation of government investment through infrastructure developments … This is particularly encouraging considering the decline in tax revenues,” Layman said in commenting on the budget.

He said that although the wage subsidy for the youth is a good move, there are still not enough incentives to employ people of all ages across the economy.

In contrast, Layman said there are incentives for companies to invest in technology.

Peter Bailey, deputy chair of the Economic Affairs Committee at the Durban Chamber of Commerce and Industry (DCCI) also welcomed the speech.

He told The Witness that the principle of a wage subsidy is a move in the right direction, although this should be implemented immediately.

Bailey said Gordhan’s warning that tax hikes might be on the cards in the future was the wrong statement to send out to the business community, especially in light of the fact that South Africa’s tax burden in relation to GDP (Gross Domestic Product) is already above 25%.

Most commentators criticised the 25,5 cents a litre increase in the fuel levy.


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