As expected, the Budget held few surprises. But one thing is sure, this has to be the year of delivery, writes Madeleine Wackernagel
TREVOR MANUEL is not the only optimist on the state of South Africa’s economy: the latest edition of The Economist magazine states: “A real turnaround seems to be under way.”
And Manuel’s “no smoke, no mirrors” Budget is designed to underpin the economy’s renaissance and with it, the government’s commitment to the Gear (growth, employment and redistribution) strategy.
The Budget Review states: “Real incomes have begun to increase and a new vigour is apparent in South African industry and trade. Investments are being made with growing confidence and international opportunities are widening. The 1997-98 Budget seeks to reinforce these trends, while continuing the expenditure reprioritisation … initiated by the Reconstruction and Development Programme.”
A Budget deficit target of 4%, says Manuel, should not mean the end of social transformation. Expenditure will be kept down through better management controls – and “a firmer hand on wish lists”. The time has come for the government to demonstrate that life can be different, he said on Wednesday. “It is imperative in the context of Gear to demonstrate that we are not just taking but also giving. In this context, direct transfers and social grants are very important. So the pressure will be on the South African Revenue Service to render unto Caesar what is due to Caesar.”
In line with Gear, Manuel is taking a medium-term approach; miracles are not on the cards. Although his growth forecast – of 2,5% – is not quite as optimistic as the Reserve Bank governor’s, who considers 3% more feasible, the medium-term prospects are “positive”.
Manufacturing should benefit from supply- side measures, ensuring rapid expansion this year, while strong export growth will narrow the current account gap and greater inflows of capital will help shore up the foreign reserves.
Inflation, while higher than last year, should still come in below double-digits, but some easing is likely as domestic expenditure slows and the public sector borrowing requirement falls.
So far, so positive. There are plenty of negatives, in particular, the unemployment rate of 29% – or 4,7-million economically active people -according to the October 1995 Household Survey.
But Manuel believes the combination of industrial, labour market and infrastructural development strategies, within a sound fiscal and financial environment, will ensure good progress on this front.
Thus, greater emphasis is placed on tax incentives for manufacturing industries and export promotion, superseding the general export incentive scheme, which will be phased out by the end of this year.
Small business is also targeted, with the Khula Enterprise Finance company up and running and a loans programme due to get under way this year. Infrastructure spending is another potential job creator, with increasing use of small and medium- sized contractors and more labour-intensive construction methods. To this end, a total of R19-billion has been earmarked for the principal projects – road construction, water provision, support for agriculture and industrial promotion programmes.
With these programmes, Manuel has managed to satisfy two different constituents, business and labour, while keeping the promises made in Gear and still following the aims of the Reconstruction and Development Programme. While it held few surprises – in terms of the parameters set out in Gear, the minister had little room to manoeuvre – it nonetheless marks a turning point: this, finally, has to be the year of delivery.