South Africa is in a relatively strong economic position, Finance Minister Pravin Gordhan said in his Budget speech in Cape Town on Wednesday as he unveiled a budget of R979.3-billion.
Gordhan presented a budget that targets infrastructure development, job creation and skills upgrading while increasing social spending in areas such as health, education, housing and welfare grants.
"Strong commodity prices, low interest rates and faster global growth have been the main forces behind our economic recovery," Gordhan told Parliament.
He said South Africa's gross domestic product (GDP) growth was projected at 3.4% this year, rising to 4.1% in 2012 and 4.4% in 2013, after the economy shrunk by 1.7% in 2009.
Consumer inflation is expected to come in at around 5.3% this year, down from 8.9% in 2008.
However, unemployment now stands at 24% – 2.2 percentage points higher than at the end of 2008.
National government net debt is set to rise from R526-billion at the end of 2008/09 to over R1.3-trillion in 2013/14, and a deficit of 5.3% is projected for the 2011 financial year.
"The impact of slightly slower growth in revenue and additional expenditures is that the deficit for the next year is half a percentage point of GDP higher than we projected in October," said Gordhan, hastening to add that the deficit was expected to decline to 3.8% in 2013.
"This reduction in the deficit over the next three years is consistent with stabilising the growth in our debt and the conduct of a counter-cyclical fiscal policy," he said.
The 2011 Budget totals R979.3 billion, an increase of 9.1% over last year's budget.
The lion's share will go to social services, which is to be allocated R577.3-billion (an increase of 11.8%), while R189.5-billion will be spent on education, R121.9-billion on housing, R112.6-billion on health, and R146.9-billion on social security.
An additional R39.4-billion will go to pay those in the public service following last year's wage agreement.
Wages to civil servants have doubled over the last five years, from R156-billion to R314-billion, making up 40% of the government's consolidated non-interest expenditure.
In a media briefing before his Budget Speech on Wednesday, Gordhan said the National Treasury was looking to move towards a better fiscal position which would enable the country to save "in the good times".
He said the budget surplus in 2008 had enabled the government to continue spending during the recession.
"Where elsewhere in the world today you have all sorts of harsh austerity, we were able to sustain government expenditure across the fronts," Gordhan said.
"We didn't cut grants, we didn't cut pensions, we didn't cut the investments we were making in infrastructure or in education."