South Africans have every reason to be confident in our country’s growth prospects and the way in which the economy is being managed. In the medium-term budget policy statement, the government has again demonstrated that it maintains a firm hold on the country’s finances and will take the necessary tough decisions to advance our economy.
The statement, delivered by Finance Minister Pravin Gordhan last week, details the government’s spending plans over the next three years and shows clear commitment to fiscal restraint and discipline.
In his address, Minister Gordhan said: “Government remains committed to macroeconomic stability, supported by prudent fiscal management and sound monetary policy.” The minister explained that these policies have ensured that South Africa’s finances are sustainable and they have safeguarded wages, social benefits and savings from being eroded by high inflation.
This prudent economic stance has also allowed the economy to remain robust in the face of external economic shocks such as the recent global economic recession. Under the helm of President Jacob Zuma government charted a course to ride out the global recession and adopted a counter cyclical approach of spending on infrastructure development to help stimulate the economy.
This has been supported by the necessary adjustments in government spending to ensure that we remain within our spending envelope. Senior government officials will lead by example by implementing the stringent spending measures announced by the Finance Minister, include restrictions on travel, catering, hotel accommodation and the purchase of luxury vehicles.
Minister Gordhan emphasised: “As government, we acknowledge that we too must provide value for money. Although most government spending is effectively managed, there are many opportunities to cut or minimise cost and stop abuse.”
The new measures, as agreed to by Cabinet, will come into effect on 1 December 2013 and are expected to save more than R2 billion. Importantly, overall new expenditure has been significantly curtailed while spending growth over the next three years is expected to be much lower than in the past.
The government plans to keep the real growth of government spending to only 2.2 per cent over this period. This year total government expenditure has been revised downwards by R5.7 billion from the budget forecast in February and is now estimated at R1.05 trillion. Government spending will rise to R1.24 trillion in 2014/15, R1.34 trillion in the following year and R1.44 trillion in 2016/17.
Since 1994 the fiscus has been managed in a balanced and responsible way, an approach that has characterised our democratic dispensation.
The key economic reforms undertaken by government have given rise to a high level of macro-economic stability. This has, in turn, led to a reduction in taxes, lower tariffs, control of the fiscal deficit, a relaxation in exchange controls and the provision of much needed social services and infrastructure development.
The influential economic news and policy website, Emerging Markets, named Minister of Finance Gordhan, as the Finance Minister of the Year for 2013, noting that “the prudent fiscal policy led by Pravin Gordhan, who became finance minister in 2009 at the height of the global economic crisis, has been praised by analysts”.
The medium-term budget policy statement, reassures international investors and international rating agencies that we are committed to long term sustainability and sound financial management. In line with our commitments under the National Development Plan – the country’s roadmap for the next 20 years - we are currently implementing a number of projects that will support more rapid growth.
The country’s massive R4.3 trillion infrastructure investment programme, which President Zuma steers through the Presidential Infrastructure Coordinating Commission is being rolled-out around the country.
To improve our passenger rail services, the government has embarked on one of the world’s biggest rail transport projects to overhaul the country’s passenger trains worth more than R50bn. Additional electricity supply will support the national grid with the construction of Eskom’s Medupi and Kusile power stations.
Moreover, tax incentives for industrial development projects amounting to R10bn have been approved over the past 3 years, which will support investment amounting to R35bn. The Expanded Public Works Programme created 970 000 work opportunities last year while the Jobs Fund has approved R3.4bn to more than 60 projects. This will generate 90 000 permanent jobs and about 100 000 training opportunities going forward.
In the coming year’s growth will be steady. For 2013 it is projected at 2.1 per cent rising to 3.5 per cent by 2016. When compared to 1 per cent growth expected in the Euro zone next year, South Africa is clearly on the right track.
The government remains confident that its fiscal policies are sound and we are on course to emerge stronger, more resilient and better equipped to ensure a better life for all.
Phumla Williams is Acting CEO of the Government Communication and Information System (GCIS)