'Mini budget' infrastructure boost
25 October 2005
A vigorous economy growing at around 4.4%, robust consumer spending, higher than expected company profits and a rapid growth in imports has given a massive boost to the government's finances, according to the medium term budget policy statement released by the National Treasury on Tuesday.
"The years since 2001 have seen steady improvements in the momentum of economic growth, employment creation has accelerated, investment expenditure remains brisk and government revenue in 2005/06 will once again exceed the main budget estimate by a substantial margin," Finance Minister Trevor Manuel told Parliament in Cape Town.
The revised revenue estimate for 2005/06 is now just over R400-billion, R30-billion more than February's budget estimate, due to increased tax revenues.
On top of this, the costs to South Africa of servicing its debt is "down sharply", R1.3-billion less than anticipated in February. And with total national budget expenditure now
standing at R415.8-billion, the expected deficit of R15.7-billion is just 1% of gross domestic product, compared to a February projection of 3.1%.
All this allows for a "substantial upward adjustment in public expenditure plans", with an additional R78.3-billion now available for spending in the 2006 budget framework.
'One big construction site'
With extra cash in government's pocket, infrastructure is getting a major boost. An additional R31.5-billion overall will go to passenger rail services and national and provincial roads and other transport networks over the next three years. This is more than double the additional money provided for infrastructure in the previous budget cycle.
And with the World Cup looming in 2010, R3-billion has been set aside for the modernisation of stadiums, Manuel said, adding that "good progress" had been made in identifying municipal transport improvement projects.
In the words of one Treasury
official, South Africa will soon resemble a massive construction site.
Other prime targets of increased government spending are investments in the built environment. An additional R20-billion is going to housing, municipal infrastructure grants, water schemes, public transport and community facilities.
The Gautrain project, a rapid rail link between Johannesburg, Tshwane and Johannesburg International Airport, will cost over R20-billion over the next five years, Manuel said. A Treasury official said this project gets an additional R8-billion over the next three years.
Investing in people's capabilities
"Against the background of South Africa's unequal history, investment in people's capabilities, investment in housing, water services and electrification and investment in our second economy are also necessary, growth-enhancing initiatives," Manuel said.
"By broadening participation and opportunities, we will also strengthen the
dynamic of growth itself."
On top of the baseline allocation (that was already allocated in the February budget), R12-billion goes to social services in the form of higher education, hospital revitalisation, community libraries, social grants, sports and cultural institutions.
An extra R9-billion is allocated for science and technology development, communications infrastructure, industrial policy initiatives and tourism and small enterprise development.
An additional R7-billion goes to South Africa's courts, police capacity, defence equipment and improved access to justice services.
Public administration, provinces
And an additional R8-billion goes to investment in public administration, with an upgrading of South Africa's ports of entry, modernisation of financial administration, a further strengthening of revenue administration and capacity building in the Department of Home Affairs.
Overall, provinces are being
allocated an additional total of R46-billion in equitable (provincial discretionary spending) and conditional (national discretionary spending) grants.
A strong focus of this spending will be more money going to improve public hospitals, schooling (free schooling is being phased in for schools in low-income areas), community infrastructure and social welfare services in communities.
On top of this, R2-billion goes to municipalities, and R30-billion is being used by national departments over the next three years, providing a total of R78-billion in additional funds.
The costs to South Africa of servicing its debt are expected to be R52-billion this year, R1.3-billion less than anticipated in February.
That South Africa can expand its fiscal policy while at the same time reducing its debt burden is a tribute to both the vigorous economy and the country's economic management, under a finance minister who believes that, using his own words, "debt sucks".
Source: BuaNews
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