Prudent policies keep SA on course

06 March 2013

At the height of the global economic crisis several countries found themselves floundering with their economies on the verge of collapse. Like a rudderless ship they were being pounded mercilessly by wave after wave of negative economic news.

South Africa, as part of the global community also had to face the rough seas of the global economic turmoil but while others floundered and edged toward their fiscal cliff, our ship sailed steadily forward as a result of prudent economic policies we adopted.

Under President Jacob Zuma we charted a course to ride out the global recession and adopted a counter cyclical approach of spending to help stimulate the economy.

While the economy grew, albeit at a slower pace – growth in gross domestic product (GDP) slowed to 2.5 per cent last year and is predicted to grow at 2.7 per cent this year - we remain in a much better position than some economies in the developed world.

In this year’s national budget government is again steering the country away from the turbulent waters through controlling expenditure and seeking to stimulate the economy.

In presenting it, Finance Minister Pravin Gordhan said: “The 2013 Budget is presented in challenging times, but against the background of a new strategic framework for growth and development. This is a budget in which there is limited room for expansion, yet there are significant opportunities for change.”
Government has made the necessary adjustments to ensure that we remain within our spending envelope. New expenditure has been significantly curtailed while spending increases have been capped at 2.3 per cent a year over the next three years.

These measures are necessary to counter the drop in revenue of R16.3 billion which is a result of slower growth due to the global economic recession, lower commodity prices and instability in the mining sector.

In real terms our spending plans have been reduced by R10.4 billion through reprioritisation, savings and a draw-down on our contingency reserve.

Gordhan emphasised that: “Government is committed to remaining within the expenditure ceiling set out in the budget. New policy initiatives over the next three years will be financed from savings, efficiency gains and reprioritisation.”

In instances were programmes are not performing or not aligned to government’s core priorities, money will be taken away and distributed to programmes that are delivering. Government’s procurement system will also be overhauled to become more efficient. A project team seconded from both the private and public sector will begin enhancing the system.

This will include the setting of fair value prices for certain goods and services while those responsible for infringing procurement rules will be investigated. To stimulate the economy, government is calling on business to partner with it in investing in the economy. It is estimated that South African corporates are reported to be holding over R500 billion in un-invested cash.

We are supporting business investment through incentives such as the Special Economic Zone (SEZ) Programme which will offer a lower tax rate of business in the zone and allow for 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.

The government is 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.

Our investment in developing large-scale infrastructure also presents new opportunities of business to invest and grow. The government has committed R827 billion over the next three years through the fiscus and state enterprises to infrastructure development.

Also, the Presidential Infrastructure Co-ordination Commission (PICC) is considering other projects totalling R3.6 billion in other projects in the long term.

The national Budget also supports poor households through social spending accounting for 60 per cent of our expenditure. The Budget provides social grants to nearly 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. Over the next three years R277 billion will be allocated to local government in support of the subsidy.

The 2011 Census results clearly demonstrate how our social spending is changing 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 over 16 per cent a year and Government has provided more than 1.5 million free homes. We earmarked funds to provide sanitation services to 36 742 rural households and 119 223 housing loans through the microfinance programme.

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

The government is confident that our fiscal policies are sound and we are well equipped to continue moving forward in our quest to ensuring a better life for all.

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