MEDIUM TERM BUDGET 2003-06
SA a great place to be: Manuel
13 November 2003
Finance Minister Trevor Manuel has expressed confidence in the country's economic outlook, saying South Africa's coffers are in a sound condition while the level of investment in the economy continues to rise - putting the government in a better position to tackle social ills such as poverty, crime and underdevelopment.
Delivering his Medium Term Budget Policy Statement in Parliament on Wednesday, Manuel said the country's economic growth forecast has been scaled back from 3.3% to 2.2% for the current financial year, but is forecast to rise to 3.3% again in 2004 and to 4% by 2006.
Manuel attributed the forecast revision to a weaker global economy, saying that growth was expected to rebound in the coming years as the international environment improved. "We operate in a global environment which is showing 'stickiness' in respect of growth", he said.
Manuel told Parliament that gross domestic expenditure was expected to remain firm this
year, with growth forecast at 4.7%, up from 3.8% projected in the February Budget.
"Exports are expected to fall by 4.2%, hampered by a weak global economy and a strong currency, while firm domestic consumption and investment growth will boost import demand, raising volumes by 5.8% in 2003", he said.
"We have a sound economy, a responsible budget framework, a plan to raise the level of investment in the economy, firm proposals to tackle unemployment, and strong growth in social transfer."
"South Africa is a great place to be", Manuel said. "Not because we have a sound economy, beautiful beaches and games parks, cultivate wonderful wine or produce brilliant kwaito, but because, as a nation, we are building a future, we are confronting our past."
Health, education, social security, public works
Spending on health will increase to R1.1-billion next year and R2-billion by 2006/7, Manuel said, while the restructuring of higher
education will receive R3-billion. Over the same period, the government will fast-track service delivery, with an emphasis on public works projects, the provision of basic necessities, and black economic empowerment programmes.
The proposed division of revenue sees a gradual shift of resources in favour of provinces and municipalities, where the majority of social services, health, education and welfare spending is prioritised.
Manuel said that infrastructure grants to provinces and municipalities would rise by R3.2-billion over baseline, mainly to fund the Expanded Public Works Programme. The programme, one of the key agreements of the 2003 Growth and Development Summit, is central to the government's efforts to create jobs and develop skills in the country.
Of an additional R2.5-billion to be allocated to provinces, R2.1-billion will be used to cover expenditure on increasing numbers of social grant recipients, especially child support and disability grants. The
government currently provides over seven million South Africans with social grants.
Manuel said the government is committed to investing in low-income neighbourhoods and under-serviced communities, partially through the provision of free basic water, electricity, refuse removal and sanitation. This would be achieved through stepped-up infrastructure delivery through a consolidated municipal infrastructure grant that would address backlogs in the provision of these services, Manuel said.
"Local government receives the biggest percentage increase in the proposed framework due to its vital role in delivering basic services to poor communities", he said.
The budget framework also sets aside R1-billion during the next financial year, R2-billion in 2005/2006 and R3-billion in 2006/2007 to support black economic empowerment.
Stronger rand brings huge savings
The appreciation in the value of the rand over the last year, attributed in
part to the country's continuing macro-economic stability, has saved the state billions of rands, Manuel told Parliament.
The state's debt cost, Manuel said, would be R3.8-billion less than anticipated in February.
"Mainly as a result of the stronger rand, defence expenditure on the strategic arms procurement programme this year will be R1-billion less than budgeted, and expenditure abroad by the department of foreign affairs is reduced by R114-million."
Manuel added that the budgeted amount of R250-million that was due to be transferred to the Unemployment Insurance Fund would not be transferred, as the Fund had enough cash surplus to sustain itself.
"R200-million for capital works on the correctional services vote will not be spent this year, and an amount of R215-million on the housing vote is surrendered as a result of the disestablishment of the SA Housing Trust and the transfer of its liabilities into government debt", Manuel said.
Taking into
account savings due to the stronger currency resulting from the contingency reserve of R3-billion, and the anticipated under-spending of about R700 000 on various votes, revised expenditure for 2003/04 now stands at R331.5-billion, R2.5 billion less than the main budget estimate, Manuel said.
Praise for Maria Ramos
Manuel took his hat off to former National Treasury Director-General Maria Ramos, whom he accredited for "strengthening the linkages between growing the economy and fighting poverty.
"It is her unstinting commitment and understanding of the role that macro-economic stability plays in reducing poverty and unemployment in the long term that she will be remembered", he said to the applause by MPs.
Ramos is currently working for transport parastatal Transnet.
Source: BuaNews
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