The week our world changed?—?I love it, cynics certainly won’t

2012-02-25 00:00

FROM my earliest memory, I’ve been in love with this country. But rarely have I felt so proud to be a South African as right now. It’s been a momentous fortnight. We didn’t win any World Cups or gold medals. What happened was a lot less obvious, more subtle, even a little stealthy. But once you absorb this week’s Budget and overlay it with the State of the Nation speech it all becomes clear. Something very big has just happened. Life in South Africa will truly never be the same again. Depending on where you sit, that’s either a cause for great celebration or the final straw that forces your emigration. I’m with those cheering.

After decades of tolerating two very different worlds in a single nation, we’ve been challenged to become one. No longer is the occasional visit to the other side enough. No longer can we disregard one of the worst health systems on earth, an education system that turns out too many bereft of any hope, a social structure that forces millions of young girls to choose between finding a sugar daddy or becoming a prostitute.

We’re being forced to face these realities every time we reach for our wallets. Every time we think about profit from our endeavours. Because after Pravin Gordhan’s Budget Speech, there is no longer any doubt. South Africa is on a new road. Its citizens are being forced to face up to their responsibilities. Some gladly. Many dragging and kicking. But all are affected.

It is important to remember this is only the third Budget of the Zuma administration. With hindsight, its first, in 2010, saw deference to predecessors. Last year’s Budget introduced some adjustments, but nothing to signal a change in the national agenda. This week’s Budget was very different. Aggressive, focused and forthright. It was the work of activists, not politicians. And if you thought the 2012 Budget was bold, just wait for 2013.

Three signposts on our new road stand out clearly.

The Zuma administration is desperate to apply economic growth lessons from its new best friend and teacher, China. That means investing heavily in infrastructure, turning the country into a giant construction site. The State of the Nation lit the flare. The Budget is fuelling it.

Next, we’ve become a country deeply concerned with the plight of its poor. No more lip service. Now it’s action — most obviously, the National Health Insurance, which will add R6 billion to our taxes next year and multiples thereafter. Also coming: stepped up investment in housing, electricity and water provision for the least fortunate. Each family of four now gets state services worthR3 940 a month. That’s sure to rise in future.

But together with these socialist tendencies is a very necessary discipline drawn from the heart of capitalism. Zuma and Co are rejecting the populist route of spending now and worrying tomorrow. Instead, they are doing it within the disciplined straitjacket of what’s required by global rating agencies. The key economic ratios will be kept tight.

Bottom line? The development state is now kicking into gear. It opens a new world for the previously excluded. On the other side, being rich and privileged won’t be as much fun. Virtually half the price of that bottle of Bells (or Klipdrift or Mainstay) will go into the public coffer. One cent in every rand played on the Lotto, the races or casinos will go the same way. As will another 28c in every litre of petrol or diesel. Introduced this week, those are not the normal adjustments we’ve come to expect on Budget Day. There is serious intent here. And the feeling is there is more to come. More subtle are adjustments to the preserve of the rich. Dividend receipts are no longer tax free. That change had been well telegraphed, but at a rate of 10%. Then on Wednesday, the number jumped to 15%, double the effective rate of previous dividend tax, called STC (Secondary Tax on Companies). It will take billions more from the well heeled, the top five percent of earners who already pay 37,3% of the total personal tax. Ditto capital gains tax. Left alone since being introduced a decade back, the effective rate shot up a third. Instead of paying over 10% of any long-term gain, we will now contribute 13,3%.

These changes will strike fear in the hearts of free marketeers. They will fret about chasing away the most enterprising, most productive members of society. They will worry that job-creating entrepreneurs and the highly skilled will take their talents elsewhere. Perhaps. But given the parlous state of the global economy, there are not many alternatives right now. The timing couldn’t be better. Or the need greater. That’s the real brilliance of what just happened.

• Alec Hogg is the founder and editor-in-chief of Moneyweb.

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