Economy 'working for our people'
Shaun Benton26 October 2006
For the first time in a generation, South Africa's economy is creating jobs faster than new entrants are joining the labour force, Finance Minister Trevor Manuel said on Wednesday.
Up to 540 000 new jobs have been created in the past year, Manuel told reporters in Cape Town, releasing the Medium Term Budget Policy Statement ahead of his tabling of the Adjustments Appropriation Bill in the National Assembly.
Over the past three years, over one million jobs have been created, he told MPs, due to "robust economic growth supported by strong consumer spending and rising investor confidence".
Manuel added that "though it is too early to claim victory in the battle against unemployment ... we can already see how the policy choices made a decade ago are bearing fruit".
The new entrants to the labour market are boosting household spending, along with a massive infrastructure spending programme by government and its associated public enterprises of about R370-billion over three years.
This, however, is also placing upward pressure on inflation. But Manuel indicated that the government was determined to stick to its 3% to 6% inflation band target, although inflation is expected to rise further over the next six months.
After that, consumer inflation should moderate, he told MPs, to average about 4.8% over the next three years.
Infrastructure spending to keep growing
And spending on public infrastructure will continue to grow.
"We now expect spending on public infrastructure to grow by about 15% a year, to reach about R150-billion a year by 2010," the minister said.
While R15-billion has been set aside for South Africa's hosting of the Soccer World Cup in 2010 - with R8.4-billion going to stadiums and R6.7-billion to public transport and surrounding infrastructure - there is also a strong focus on other service delivery requirements in the 2007 Medium Term Expenditure Framework (MTEF).
Police, courts, prisons
With concern around crime levels climaxing in the past few months, the MTEF makes provision for adding 10 000 people to the South Africa Police Service (SAPS), which will raise staffing levels in the service to 193 000 by 2010.
The finance minister also proposed adding more employees to the country's legal system to improve court case flows.
Spending on justice, police and prisons will grow by 9.4% a year over the next three years, well above the expenditure average of seven percent, rising to R67.2-billion by 2009/10.
An additional R3.5-billion has been allocated to justice and crime prevention in the 2007 MTEF.
The criminal justice system is "clearly a focal area," Manuel said.
Defence, foreign affairs
The budget for defence and foreign affairs has been boosted by R5.9-billion on the three-year baseline estimate, although Deputy Finance Minister Jabu Moleketi put most of this increase down to the impact of the depreciation of the rand on the country's major arms procurement package, which will absorb up to R2-billion.
The bulk of payments towards the corvettes, submarines, Gripen fighters and military Airbus A400M purchases are being made between now and 2011, with the Treasury compensating the Defence Ministry for a depreciating rand.
Community development, housing
A large chunk of additional expenditure - R16.3 billion - goes to housing, municipal services and community development, with further resources expected from the private sector as banks begin to provide loans for the low-income housing market.
The community development component receives a substantial amount - R3.7-billion - which goes to a neighbourhood development partnership grant to fund improvements in settlements.
And an additional R2.7-billion over the next three years goes to support the integrated housing and human settlement and development grant.
While over 60 municipalities requested funding of about R5-billion in this regard, the Treasury sees the amount allocated in the context of an overall, sustained shift in resources towards provinces and municipalities over the next three years.
In total, however, the housing programme gets a budget of R29.6-billion over the medium term, with Manuel telling reporters last week, before he tabled the 2006 reviews of the provincial and local governments in Parliament, that spending on housing is growing in "leaps and bounds".
By 2009/10, spending on low-income housing is projected to reach R11.5-billion a year.
Pro-poor programmes, HIV/Aids
Overall, out of the additional R80-billion provided for over the next three years in the 2007 MTEF, R47-billion goes to provincial and local governments for pro-poor social and household service programmes, the rollout of free basic services and requirements for the hosting of the 2010 World Cup.
Spending on HIV/Aids grants, "to enable the health sector to deal with the take-up of the anti-retroviral programme and to expand a range of prevention, care, treatment and nutrition activities", is being boosted by a further R750-million.
By 2009/10, according to the MTBPS, the government will be spending close to R2.3-billion on its HIV/Aids programme.
Other revisions to the three-year baseline estimate is an additional R3.1-billion for hospitals and social welfare services, while a further R3.7-billion goes to higher education, teacher development and further education - with the minister providing for bursaries for teachers and general opportunities for Education Department employees to upgrade their skills.
The expansion of South Africa's state-owned enterprises and overall economic infrastructure gets a significant boost, with an additional R10.5-billion allocated over the medium term, while R2.3-billion goes to industrial incentives and technology, including expansion of research and development.
A total of R6-billion has been set aside for the Pebble Bed Modular Reactor project over the period ahead, Manuel told MPs.
Budget deficit down
Under the 2007 MTEF, which ends on 31 March 2010, consolidated expenditure will increase from an estimated R519-billion in the current fiscal year to R585-billion in 2007/08, R645-billion in 2008/09 and R704-billion in 2009/10.
This projected increase in revenue spending comes within the context of a broadening of the tax base - tax revenue grew by 19.1% in the first six months of this year over the same period last year - and sustained tax relief over the years, while borrowing has also been reduced.
"By reducing borrowing, we have lowered our interest costs from 21% of spending in 1998/99 to 11% in 2006/07, releasing resources for spending on service delivery," Manuel said.
The budget deficit for the current financial year is projected to be 0.4% of gross domestic product (GDP). This is substantially down from the 1.5% budgeted for in February, he added.
And revenue growth is expected to outpace spending growth again next year.
"We anticipate a budget surplus of about half a percent of GDP in the 2007/08 financial year," Manuel told Parliament, putting South Africa's public finances "on the strongest footing ... that this House has ever contemplated".