While details of the government’s planned spending on the 2010 Soccer World Cup met with acclaim in the National Assembly on Wednesday, some other aspects of Finance Minister Trevor Manuel’s mini-budget drew criticism.
Manuel said almost R15-billion of R80-billion extra in government spending over the next three years will go to major capital projects around the 2010 event.
The 2007 medium-term expenditure framework period, ending on March 31 2010, has to carry the full costs of the Soccer World Cup investment.
The national government will provide a total of R15-billion for infrastructure related to it. Of this amount, R8,4-billion is for the stadiums and R6,7-billion for public-transport initiatives and supporting infrastructure. These amounts will be complemented by contributions from local government and other partners, he said.
The 2010 World Cup also features in the additional R3,5-billion allocated for justice and crime prevention over the next three years. This money goes to expanding the police by about 8 000 officers and 2 000 civilian employees, modernising and expanding infrastructure, and for ensuring ”appropriate security” during the event.
Treasury officials at Parliament were at pains to emphasise that infrastructure spending on the soccer showpiece will benefit the country long after the final whistle in the tournament has sounded.
In his speech to the National Assembly, Manuel said that of the additional R80-billion, the provinces will get R28-billion and local government R19-billion.
The provincial transfers will fund higher spending in education, health and welfare services, and infrastructure.
Transfers to local government go mainly to the 2010 World Cup, but also to speed up delivery of free basic services as well as water and sanitation infrastructure.
According to the Medium-Term Budget Policy Statement, sustained economic growth and a sound fiscal position made it possible to budget for strong increases in spending on priority services.
Consolidated spending will increase from about R519-billion in the current financial year to R704-billion in 2009/10, financed largely through the national budget itself.
Key public spending priorities over the next three years include:
- investment in stadiums and public transport for a successful Soccer World Cup;
- strengthening the criminal justice sector, with particular emphasis on visible policing and improving court-case flow;
- increased investment in the built environment in the form of housing, roads, water, sanitation and community facilities; and
- boosting economic efficiency through investments in roads, rail, electricity generation and supply, dam construction and skills development.
Reaction
The Inkatha Freedom Party (IFP) and Independent Democrats (ID) reacted favourably to the mini-budget.
IFP spokesperson Hennie Bekker welcomed particularly plans to alleviate the economic hardships of the desperately poor.
”Furthermore, the IFP wants to reiterate our call that economic growth in South Africa through the Accelerated and Shared Growth Initiative of South Africa is of utmost importance.
”Seven percent annual economic growth is non-negotiable and all factors hampering economic growth such as interest-rate hikes should be restricted and remedied,” he said.
The 2010 Cup will have a positive effect on the economy, and therefore the IFP applauded the government for setting aside R14,9-billion for major capital projects, and the more than R4-billion to upgrade the over-stressed public-transport system.
However, Bekker warned that should the crime crisis not be solved soon, there could be a very low attendance at the 2010 showpiece, possibly ruining all economic gains currently envisaged.
The ID’s Avril Harding said Manuel is ”putting our money in the right places, but we must ensure that it goes to those who need it”.
It is necessary to pay urgent attention to lessening the tax burden on the middle-income group, which has been particularly hard hit by increased mortgage repayments. ”It is time to consider tax relief in relation to home ownership,” Harding said.
Democratic Alliance (DA) spokesperson Ian Davidson said President Thabo Mbeki’s panel of international economic advisers had urged Manuel to be more imaginative in his planning.
”If that is the benchmark, then this Medium-Term Budget Policy Statement falls well short of the mark, with no new policy thrusts announced to ensure we achieve at least 6% GDP growth by 2010 and halve unemployment by 2014,” he said.
The DA was disappointed Manuel had not set out proposals to use South Africa’s fiscal system in a much more proactive way to encourage greater investment on the production side of the economy, more specifically in export-orientated and job-creating concerns, he said.
According to the mini-budget documents, growth is forecast to average about 5% a year over the medium term, supported by healthy investment levels and a recovery in exports alongside moderating consumption spending.
GDP is projected to increase from the 2006 estimate of R1,694-billion to R2,277-billion in 2009.
The current account of the balance of payments deficit grew from 4,5% of GDP in the second half of last year to more than 6% in the first half of this year.
”While financial inflows more than offset the current-account deficit at present, accelerated growth over the longer term will depend on industrial and trade policy reforms that bolster exports and moderate South Africa’s trade deficit,” the document said.
While CPIX inflation has been trending upwards from a low of 3,7% in April, it is expected to average about 4,8% over the next three years.
Zuma’s fees
Manuel’s adjusted budget has also shifted R10-million from salary savings in the Presidency to pay for the legal fees faced by former Deputy President Jacob Zuma.
According to details of adjustments to estimates of national expenditure tabled in Parliament on Wednesday by Manuel, a virement — an amount shifted from one budget programme to another — of R10,76-million was shifted from ”compensation of employees” and used for the legal fees.
The remaining R760 000 is earmarked for human-resource-related projects in the Presidency.
Zuma was axed as deputy president last year but a case of corruption against him was recently struck off the roll. He also was acquitted on a charge of rape. — Sapa, I-Net Bridge