Government firmly in charge of the country's finances

06 March 2013

South Africa’s blue print for the next 20 years to steadily roll back unemployment, poverty and inequality is slowly beginning to take shape and is now firmly at the centre of our economic thrust.

Delivering his 2013 Budget Speech, the Minister of Finance, Pravin Gordhan said: “The strategic plans of government and the medium-term expenditure plans will be aligned to realise our National Development Plan (NDP) objectives.”

This will set South Africa on a fresh economic course which is in line with our NDP commitments of bringing about faster economic growth, higher investment and greater labour absorption.

However, it cannot be achieved overnight; it requires a shared vision and unity of purpose that is coupled with steadfast dedication to effect the change we want to see in our country.

Minister Gordhan said: “Looking back on the path we have travelled since 1994, we see the importance of a long-term perspective on development and change. It is people acting together for a common vision that connects the past to the present, and makes a better future possible.”

The NDP is uniting all South Africans around a common programme to achieve prosperity and equity.

The national budget demonstrates that government is willing to take the necessary tough decisions today to ensure that the plan works.

Minister Gordhan further elaborated that “national development must be coupled with fiscal sustainability, which ensures that the progress we make will not be interrupted or reversed”.

To achieve fiscal sustainability government has significantly curtailed new expenditure and capped spending increases to 2.3 per cent a year over the next three years so that future generations will not be burdened by excessive debt.

Spending plans have been reduced by R10.4 billion through reprioritisation, savings and a draw-down on the contingency reserve.

In instances were programmes are not performing or not aligned to government’s core priorities, money will be taken away and given to programmes that are delivering.

While reigning in the purse strings, government has asserted that this will not be done at the expense of our social commitments.

To help support poorer households, social spending will account for 60 per cent of our expenditure, up from 49 per cent a decade ago.

The Budget makes provision for 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 learners.

This year almost 60 per cent of all households will receive a subsidy of R275 a month for the provision of free basic services.

The 2011 Census results show how our social spending is helping change lives, more than 36 per cent of households have access to free clean water, 26 per cent have access to free basic electricity and 23 per cent to free sanitation.

Since 2008 the amount spent on housing and community amenities has increased by more than 16 per cent a year and government has provided more than 1.5 million free homes.

There are further plans to build 409 143 houses over the next three years for households with a monthly income below R3 500

Furthermore, over the next three years we earmarked money to provide sanitation services to 36 742 rural households and 119 223 housing loans through the microfinance programme.

Our investment in the future of our young people through education continues to attract the largest share of the budget at R232 billion.

This investment ensures that 70 per cent of learners in 20 688 schools do not have to pay school fees and 8.8 million children are provided with a meal on each school day.

The impact of our social grant programme cannot be over emphasised; it provides a safety net for families and communities who would otherwise be devastated by the scourge of poverty and unemployment.

The Minister of Finance said: “Substantial growth in social spending over the past decade has financed a threefold increase in the number of people receiving social grants… the impact is evident in improved living standards, expanded access to basic services and the changing landscape of both urban and rural areas”.

The number of grant beneficiaries will increase from nearly 16 million people in 2012 to 17.2 million in 2015.

This year our spending on social assistance includes: R1 260 for old age and disability grants, R1 280 for the veterans grant, R 800 for foster care grant and R290 for a child support grant.

While our social grant spending will increase over the medium term, Minister Pravin Gordhan emphasised that our social support was not “a substitute for job creation”.

Government understands that our future development must be underpinned by fiscal sustainability which is supported by faster growth and an increase in the tax base.

As a result Government is encouraging business to invest in the economy through incentives such as the Special Economic Zone (SEZ) Programme which will offer a lower tax rate and tax deduction for workers earning less than R60 000 a year.

This year the Manufacturing Competitiveness Enhancement Programme (MCEP) has been funded to the tune of R1.7 billion to assist manufacturers with their competitiveness and ensure job retention in the sector.

Through the Jobs Fund initiatives government has approved grant funding of R3.3 billion, matched by a further R3.1 billion in funding raised by the private sector.

We are also encouraging local businesses to expand into Africa to support the continent’s growth and in turn support our own. We will introduce measures to relax cross-border financial regulations and tax requirements on companies.

The country’s investment in developing large-scale infrastructure also presents new opportunities for business to grow. Government has committed R827 billion over the next three years through the fiscus and state-owned enterprises to the project.

We remain firmly in charge of the country’s finances and have set a clear plan to guide the country. There is every reason to be confident in the direction we are taking.

Phumla Williams is Acting CEO of the Government Communications and Information System (GCIS)