By Minister Jeff Radebe
Since the start of democracy we have always placed a strong emphasis on the prudent management of our economy. Even today this continues to form the basis of our economic stance.
The 2016 National Budget, delivered against a backdrop of a tumultuous global economy and difficult local conditions, continues our track record of an economy managed in a balanced and responsible way.
“This year’s Budget is focused on fiscal consolidation. We cannot spend money we do not have. We cannot borrow beyond our ability to repay. Until we can ignite growth and generate more revenue, we have to be tough on ourselves,” said Finance Minister Pravin Gordhan.
Government will reign in expenditure and raise revenue through tax increases outside personal income tax. This will take us out of debt much sooner than expected as we aim to reduce the budget deficit to 2.4 per cent by 2018/19.
It is a strong signal to international rating agencies that our investment grade status is not a risk. Investors are reassured of the macro-economic certainty and stability that they have become accustomed too.
Our actions are in direct contrast to talk in some quarters that we would abandon our careful stance in favour populist measures that would lead to an increase in spending.
These assertions cannot be comprehended given that our history tells a very different story. In fact, we have in the area of economic management consistently proved the critics wrong.
Over the years our prudent fiscal management and monetary policies have given rise to high levels of macroeconomic stability, promoted competitiveness and increased the economy's appeal.
Our actions have allowed the economy to remain robust where other countries have buckled under the tighter global economic conditions. In comparison, we find many of our emerging market peers are already in recession.
The emerging market quagmire is a result of a change in sentiment, particularly towards those nations that depend mainly on commodity exports. This is despite the significant role many of them played in shielding developed countries in 2008 from an economic catastrophe of their own making.
We are responsible in the manner in which we manage our economy because we understand the impact it has on uplifting the majority of people in the country out of poverty.
The economy plays a critical link in bridging the inequality divide. It is central to creating the better life that we envisage for the majority of South Africans.
Moreover, we had experienced first-hand the repercussion of a poorly managed economy when at the end of apartheid we inherited an economy that was technically bankrupt. The economic woes at the time stemmed from the long-term effects of apartheid’s distorted policies. It was structured to serve the needs of some rather than all; it focused on the needs of corporations rather than people.
South Africans have every reason to be confident in our country’s economic prospects and the way in which the economy is being managed.
Minister Gordhan said: “In the numbers… there are indicators that an economic turnaround is possible if we build confidence and make the right choices.”
Government has demonstrated that it maintains a firm hold on the country’s finances and will take the necessary tough decisions to advance our economy. While we do not anticipate an easy year ahead, the National Budget shows that we are managing the fiscus and the economy in a way that encourages growth without jeopardising our stability.
Importantly, while we are set on reining in the purse strings, this will not be done at the expense of our social commitments.
The Budget provides social grants to almost a third of the population, pays for free services at public health facilities, the provision of water and electricity in poor communities and no-fee schools for poorer pupils.
In support poorer households, social assistance will increase from R129 billion this year to R165 billion in 2018/19.
We have also prioritised our spending on education to empower young South Africans to be the best that they can be. Basic education expenditure will increase from R204 billion this year, to R254 billion in 2018/19.
As part of our education drive, we will over the next two years rebuild 510 inappropriate and unsafe schools. We will also supply 1 120 schools with water and 916 schools with electricity.
Government is confident that together we can rise above these difficult economic times on to a path of greater growth. It will require a social contract in which everyone does their share to move the economy forward.
Jeff Radebe is the Minister in The Presidency
