South Africa’s 2016 National Budget was tabled in challenging global economic conditions, with low growth at home, Finance Minister Pravin Gordhan said at a media briefing on Thursday.
“It’s a tough Budget,’ he said. “We are finding ourselves in a very difficult global economic environment with lots of doubt on whether the developed world will continue to grow . We’ve seen that currencies of emerging markets have been affected and commodity producers have been affected.’
The Budget, tabled in Parliament on Wednesday, comes at a time when high unemployment levels and slow growth have demanded greater investment by the government.
“We have our own internal difficulties as South Africa,’ Gordhan said. “We’ve been growing too slowly. Our unemployment levels are too high, poverty and inequality levels are also high … Government has, for the last six years or so, been carrying the substantial burden of investing in infrastructure, for example.’
He said the country must come up with new answers.
“At the same time, we’ve borrowed a lot since 2009 in order to sustain, in particular, our social services and invest in infrastructure and the economy more generally. We haven’t grown at the same level as we borrowed.’
This, he said, means South Africa must rein in spending.
“This means we have to tighten our belts, tax a little bit more without hurting the economy and cut expenditure within government as well. That’s the balancing act temporarily. I hope that we have to perform it until all of us can put our heads together and say: How do we grow this economy? How do we get more investment? How do we create more jobs?’
Tax relief and tackling debt
The 2016 Budget makes tax proposals that include a personal income tax relief of R5.5-billion, partially compensating for inflation, focused on lower- and middle-income earners.
Gordhan pointed out that South Africans’ household debt is high.
“Indebtedness in South Africa is a serious problem,’ he said. “Unsecured lending, at one stage, was a serious problem. The message is, we will try to do whatever we can, as we have done this time. Where there are possibilities of tax relief, we will direct the tax relief at the lower end. For example, to mitigate inflation, the money that we’ve put in (R 5.5-billion) is going to the lower income brackets.’
He urged South Africans not to overextend themselves financially. “Like government, everybody needs to balance their budgets as well until we can get the economy to start growing.’
On the nuclear build programme, Gordhan said the Budget stance is that nuclear will be expanded at a scale and pace that is affordable following a thorough and transparent tender process.
“We are at the very early stages of the programme. We will phase in the implementation of a programme like that in accordance with our affordability. We have to go through a proper, transparent procurement process.’
Investment and structural reform
Gordhan also spoke of the need for investment to grow the economy.
“For the purposes of growth, we require more investment both from government and from the private sector. We need more creative energy from our own people, we need entrepreneurs on a large scale and support for small, medium and micro-sized enterprises.’
In his Budget speech on Wednesday, Gordhan emphasised that structural reforms – such as those detailed in the National Development Plan – were needed to “turn the South African economy’s direction towards hope’.
“The Budget tabled today is guided by the NDP,’ he told Parliament. “It is a Budget for inclusive growth, it emphasises partnerships among role players in our economy, it prioritises education and infrastructure investment, it supports employment creation and it contributes to building a capable, developmental state.’
Source: South African Government News Agency and South Africa.info reporter