While expectations are that Minister of Finance Trevor Manuel will use his ”mini-budget” on Wednesday to provide details on 2010 Soccer World Cup spending, hopes are also high he will give attention to business and jobs.
In his February budget speech, Manuel said government would spend up to R5-billion in dedicated infrastructure for the competition, of which R3-billion was set aside over the next three financial years.
However, estimates of actual costs for stadiums and transport infrastructure, among others, have since increased dramatically.
On Tuesday, Democratic Alliance finance spokesperson Ian Davidson said in light of the large revenue overrun at the end of the previous financial year, he expected Manuel would focus the medium-term budget policy statement on increased infrastructure roll-out and paying off debt.
While acknowledging the need for infrastructure, spending on new bulk infrastructure beyond what was already envisioned could increase the current-account deficit and place greater upwards pressure on inflation, thus jeopardising further growth.
South Africa already needed to massively increase the flow of fixed direct investments into establishing new export-oriented manufacturing concerns to counteract the faster-growing value of imports.
Manuel would be missing a golden opportunity if he did not balance government’s infrastructure spending with a stimulation package for the supply side of the economy, which also encouraged domestic savings.
”In this regard, corporate tax cuts are key,” Davidson said.
Similarly, Solidarity trade union economist Lullu Krugel urged Manuel to focus on boosting the supply side of the economy — business — by cutting the corporate tax rate.
”This should already have been done in February,” she said.
Krugel did not expect any further reduction in personal income tax, as it would further raise demand and add to existing inflationary pressures.
”We want the focus to be on the supply side of the economy, because of the fact that it still has capacity to expand and if there is to be continued economic growth in years to come, it should result from business and from infrastructure development.
”Supply side expansion would probably alleviate inflationary pressures as well as the deficit on the current account of the balance of payments,” Krugel said.
The Federation of Unions of South Africa (Fedusa) also urged higher spending on fixed investment infrastructure projects.
”South Africa needs more hospitals, better public transport systems as pointed out by Parliament’s transport committee.
”The 2010 Soccer World Cup will place serious strain on our transport systems,” the federation said in a statement.
Most of the room created by the tax revenue overrun should be made available to the economy at large by tax cuts to employees and small businesses, and grants.
Other constraints in the economy should also be addressed, including cutting red-tape where it was shown to limit economic growth.
”Rules make business difficult, employment inconsiderable and do not always promote growth. This is true particularly for small business.”
Fedusa also wanted to see increased spending on, among others, public works programmes for the unemployed, child care and old age grants, education and skills enhancement, health, and policing and the criminal justice system. — Sapa