/ 30 October 2007

Cautious thumbs-up for Manuel’s budget

Finance Minister Trevor Manuel’s 2007 Medium-Term Budget Policy Statement (MTBPS) has received a cautious thumbs-up from some opposition parties.

Tabling the MTBPS in the National Assembly on Tuesday, he announced that almost R81,5-billion was to be added to the government’s projected spending over the next three years, bringing spending growth to 6,4% a year in real terms.

Government spending is now projected to increase from this year’s revised estimate of R604,8-billion to R672,7-billion in 2008/09, R747-billion in 2009/10 and R820,1-billion in the outer year.

The emphasis will be on investment-supporting growth and job creation, and boosting critical social- and human-development programmes.

Priorities include further investments in infrastructure, with the focus on broadening access to basic household services, public transport, education, health, labour-intensive employment initiatives, industrial-policy initiatives to raise productivity and employment, fighting crime and improving service delivery.

Democratic Alliance (DA) spokesperson Kobus Marais said that while the MTBPS largely paid lip-service to growth, the DA was encouraged that many of the proposals it forwarded on economic growth and job creation, as well as increased funding for health services and education, had been acknowledged.

Broadening access to household services, public transport, health, industrial policy initiatives aimed at increasing productivity, fighting crime and service delivery were all worthy causes that would stand South Africa, its economy and its people in good stead, he said.

However, the DA was disappointed that Manuel only paid lip-service to interventions that would raise productivity, lower the costs of doing business, cut red tape, invest more in skills development and increase the labour-absorptive capacity of the economy, Marais said.

Narend Singh of the Inkatha Freedom Party said that, overall, the government’s spending priorities for the next few years appeared to be mostly directed at the right things.

”We are, however, concerned that taxpayers should get full value for every rand the minister committed today [Tuesday].”

Some of the departments benefiting from the announcements were simply not performing adequately when it came to financial management, as pointed out by the Auditor General just last week, he said.

The African Christian Democratic Party’s Steven Swart said that his party supported the statement in broad terms, especially the continuing commitment to budget surpluses.

But the Independent Democrats took an opposing view. ”The ID is very worried about the fact that we are still reflecting a large budget surplus,” said Lance Greyling, ”given the huge socioeconomic challenges we face. This reflects a fundamental weakness of government’s ability to spend the money and deliver quality services to our people.”

The leader of the Freedom Front Plus, Pieter Mulder, thought the minister still had a number of problems, with growth only at 4,5%, while inflation was at 6% or 7%. ”To balance those two will give him problems in the future.”

Mulder also objected to the lack of tax cuts, but praised the setting aside of funds for emergency relief.

Michael Katz, the tax lawyer, was much more enthusiastic than any of these politicians: ”Good,” he said. ”Very good. It represents a continuation of a very good trend — investment for the future, conserving resources for the future,”

‘Substantial steps’

Earlier, Manuel said poverty relief, service delivery, education and health remained the national budget priorities.

The past four years had been good for the economy, with GDP growth averaging about 5% a year.

Per capita income had grown by 22% since 1999, and 1,3-million jobs created since 2003, boosting employment by about 2,7% a year.

Fixed investment had increased sharply since 2002, by over 10% a year.

”These are substantial steps towards our medium-term economic goals — growth of 6% a year or more, an unemployment rate of below 14% by 2014 and an aggregate poverty rate half that recorded in 2004.”

Foreign reserves now stood at over $30-billion, Manuel said.

In terms of the MTBPS, projected spending on transport and communication would increase from R46,1-billion this year to R57,4-billion in 2008/09, and to R76,3-billion in 2010/11 — a whopping average annual growth of 18,3%.

The corresponding figures for housing and community development were R47-billion, R55,4-billion and R70,7-billion — growth of 14,6%.

Education spend went from R106,4-billion this year to R148,6-billion in 2010/11 (11,8%), health from R63,1-billion this year to R87,3-billion in 2010/11 (11,4%) and welfare and social security from R89-billion this year to R117,5-billion in 2010/11 (9,7%).

The budget for justice, police and prisons was projected to increase from R58,6-billion this year to R78,1-billion in 2010/11 (10,1%).

Next year’s budget would contain a 2010 Fifa World Cup host city operating grant to help municipalities commission new stadiums, prepare training facilities, improve signage and develop fan parks.

CPIX (consumer inflation less mortgage costs) inflation should average 6,2% this year before returning to within the 3% to 6% target band over the medium term, Manuel said.

Household consumption, having averaged 5,5% a year since 2002, leapt to 7,4% in the first half of this year, but was expected to slow to a more sustainable four to 5% a year over the forecast period.

While job creation had been consistent with economic expansion over the past three years, labour absorption needed much more attention.

The current account deficit — about 3% of GDP in 2004 — was expected to hit 6,7% this year, 6,9% in 2008, 7,7% in 2009 and 7,8% in 2010.

However, capital inflows, which have for several years more than covered the deficit, were expected to remain healthy.

The budget surplus was expected to average 0,6% of GDP over the next three years. — Sapa, I-Net Bridge