Gordhan won't slip on their skins

LEFT-WING trade-union allies of President Jacob Zuma have reacted with fury to the business-friendly budget, unveiled on February 17th, threatening to call a general strike in the second half of the year. The first of Mr Zuma's ten-month-old government, the budget spurned left-wing calls for tax increases, nationalisation of the mines and dropping inflation-targeting by the central bank. Instead, the finance minister, Pravin Gordhan, is pursuing broadly the same prudent macroeconomic policies that prevailed under Thabo Mbeki's presidency from 1999 to 2008.

Mr Zuma has been accused of weak leadership, particularly since his dreary state-of-the-nation speech earlier this month. But he has again shown—this time via Mr Gordhan—that he is not beholden to his noisy allies on the left who helped catapult him to power.

Mr Gordhan, who did a good job running South Africa's tax service, had the misfortune to take over the finance ministry from the much-lauded Trevor Manuel just as the country was slipping into its first recession for 17 years. After growing by nearly 5% a year from 2005 to 2008, the economy shrank by 1.8% last year, shedding nearly 900,000 jobs. The official rate of unemployment, including those too discouraged to go on looking for work, now stands at 34%.

Yet the worst may be over. Figures out this week show that the economy grew at an unexpectedly fast annual rate of 3.2% in the last quarter of 2009, after barely growing in the third quarter and shrinking in each of the three previous ones. Mr Gordhan has based his budget on a fairly cautious growth forecast of 2.3% this year rising to 3.2% next year and 3.6% in 2012. That is in line with other forecasts, but it is not nearly fast enough for the government to achieve its goal of cutting unemployment by half by 2014.

Hence the anxious calls from the main trade-union federation and others on the left for inflation-targeting to be dropped in favour of a policy focused on job creation and faster growth. But Mr Gordhan argues that last year's inflation rate of 7%, still higher than in most of its trading partners, is making South Africa less competitive. Exports represented 35% of GDP in 2008. He has asked the central bank to continue with an inflation target of 3-6%. He expects inflation this year to average around 6%.

Hitting that target will be helped by this week's rejection of an application by Eskom, the state-owned power company, for a 35% rise in tariffs in each of the next three years; it had originally asked for 45%. It says it needs the money to pay for an expansion that will cost 385 billion rand ($50 billion). But after both business and labour complained, the national energy regulator says it will let Eskom raise its prices by 25% this year and 26% in each of the next two.

Mr Gordhan did throw a few crumbs to the left. Despite signs of recovery, he says he will keep his stimulus package going, by pouring 846 billion rand into infrastructure projects, including Eskom's, in the next three years. The government will also honour its election pledge to extend child-support grants to children up to the age of 18, instead of just 15. But that will hardly satisfy the trade unions or the increasingly restive poor in the squalid townships.