Benedict Mongalo, described by finance minister as a young man from Johannesburg, came in handy for Pravin Gordhan’s 2013 budget speech to plead for patience, cooperation and appreciation of the complex challenges, social pathologies, faced by South Africa.
One of many tips sent to the minister, Mongalo’s message made it into Gordhan’s speech which was chilling is parts, much as the minister was seeking to rally South Africans to work together towards a better future.
No one could have said it better than Mongalo. He writes: “We all acknowledge that unemployment, poverty and inequality are the greatest challenge facing our country… We will not eradicate this problem overnight. This is like manually moving a mountain and the only way to do it, is to move one rock aside and the next generation, or next government, will do the same until this mountain is moved.”
This made it easier for Gordhan to handle difficult subjects in his speech. “The 2013 Budget is presented in challenging times, but against the background of a new strategic framework for growth and development. This is a budget in which there is limited room for expansion, yet there are significant opportunities for change”.
Gordhan has slightly tempered with the overly aggressive expansionary budget of the past few years. That is because the economy has slowed down and tax revenue has been curtailed. South Africa’s economy is far from achieving the 5% or more growth mark required to address its social pathologies at an acceptable speed.
Gordhan said “South Africa’s economy has continued to grow, but at a slower rate than projected at the time of the 2012 Budget. GDP growth reached 2.5 per cent in 2012 and is expected to grow at 2.7 per cent in 2013, rising to 3.8 per cent in 2015.
This is not enough, said Gordhan. “Much more is needed. In particular, a significant increase in private sector investment and competitiveness is needed in the wider economy.”
He said national development must be coupled with fiscal sustainability to ensure that the progress we make will not be interrupted or reversed. “The government relies on resources derived from the wider economy, and the best way to generate resources is to grow the economy faster and increase the tax base”.
The present reality is that growth is more modest. The economic turbulence we experienced in the second half of last year has resulted in a revenue shortfall amounting to R16.3 billion. The deficit is now estimated to be 5.2 per cent of GDP in 2012/13. The growth outlook for the next three years has weakened, and government’s net debt is now expected to stabilise marginally higher than 40 per cent of GDP”. This is is a sensitive area which will be perused by international credit rating agencies who have placed South Africa’s fiscal position on close watch.
Gordhan said “Over the next three years, R827 billion is planned to be spent by the fiscus and state-owned companies to build infrastructure. The financing for these projects is in place, and is not affected by the spending cuts in the budget”.
Salient point as listed by Gordhan
• There are signs of improvement in the world economy, though the outlook remains troubled.
• South Africa’s economy has continued to grow, but at a slower rate than projected at the time of the 2012 Budget.
• The 2013 Budget takes the National Development Plan as its point of departure. The strategic plans of government and the medium-term expenditure plans will be aligned to realise our objectives.
• Government has taken measures to control growth in spending. Spending plans have been reduced by R10.4 billion through reprioritisation, savings and a draw-down on the contingency reserve.
• Government remains committed to a large-scale infrastructure investment programme.
• Our path of spending and the recovery in revenue will stabilise debt at just higher than 40 per cent of GDP. The budget deficit will fall from 5.2 per cent of GDP in 2012/13 to 3.1 per cent in 2015/16.
• A review will be initiated this year of our tax policy framework and its role in supporting the objectives of inclusive growth, employment, development and fiscal sustainability.
• In the 2013/14 fiscal year, personal income tax relief of R7 billion is granted.