South Africa’s economy not declining but it faces difficulties

In the current challenging economic climate, Finance Minister Pravin Gordhan’s Medium Term Budget Policy Statement (MTBPS), delivered to Parliament on 26 October 2016, focused on social development and transformation. The biggest challenge South Africa faces, Gordhan said, is slow global growth and its effect on investment and trade in South Africa.This is one of the reasons for a R23-billion shortfall in projected revenue, a deficit that will have to be recouped through raised tax rates. The minister conceded that he faced a challenge of implementing measures that raised government revenues without inhibiting investment.

Gordhan’s solution is to stabilise and consolidate national debt and prioritise capital investment.Over the next three years, R900-billion will be invested in infrastructure development with an emphasis on the telecommunications, energy and transport sectors.Additional funding will be channelled into health services, tertiary education and social programmes.Minister Gordhan stressed that government priorities remained:

  • Progress in providing housing, clean water and sanitation for all.
  • Creating equal access to health care.
  • Accelerating job creation and small enterprise development.
  • Expanding access to further education and advancing the country’s technological capabilities.

South Africa’s economy faces difficulties, but the economy is not in decline, Gordhan stressed.To take advantage of the opportunities for growth, government would prioritise the financing of education. “We are especially mindful of the need to expand access to post-school education opportunities,” Gordhan said, but added “this is not enough: our progress rests on improvements in the entire education system.”In addition to a R16-billion boost to the higher education budget, a further R9- billion is earmarked for the National Student Financial Aid Scheme. The effect of fee increases will be bankrolled by an additional R8-billion to aid households with an income under R600 000. These measures recognise that graduates do contribute, through taxes and loan repayments, to the next generation of students.All of these objectives, the minister explained, had to be met without leaving a legacy of debt for future generations. These aims, summed up as social transformation and inclusive economic growth, would ensure opportunities and the chance of a better life for all South Africans.Economic growth would ensure a stable and vibrant democratic South Africa.By prioritising where the government can best spend revenue and, more importantly, cut unnecessary and wasteful government expenditure, the ministry will be able to increase social grants. This modest increase – an additional R10 a month – has been necessitated by rising food costs.Other social programme spending includes:

  • An expansion in government HIV/Aids programmes, which now reach 3.5 million people.
  • Increases in the National Health Insurance’s conditional grant to continue the contracting of general practitioners and bring professional capacity into the School Health Programme.
  • New conditional grant for employment of social workers.
  • Extended child support grant for orphans.
  • Funding for 39 000 Funza Lushaka bursaries for prospective teachers.

Minister Gordhan’s statement also covered economic development, especially growth that encouraged the building of a more inclusive economy. Over the medium term the minister has proposed:

  • R45-billion to promote industrialisation, economic transformation and sustainable resource management.
  • An agri-parks initiative to help small farmers with production, marketing and training.
  • A reassignment of housing funds to speed up investment in rental housing units and planning of catalytic projects in large towns and cities.
  • Establishment of the National Radioactive Waste Disposal Institute.
  • Funding for the N2 Wild Coast road, the Moloto road and improved maintenance of both national and provincial roads.
  • High-speed internet access in government buildings.

“Fifty-five million South Africans want to see and experience real change in their lives, and continuous progress,” Gordhan emphasised.The minister challenged all South Africans to embrace a collective and concerted effort to find solutions for sustainable growth and eradicating poverty. If South Africans want the promise of the National Development Plan to be realised, Gordhan said, the country needed to embrace stable and sustainable public finances, as well as economic reforms and a transparent monetary policy.There are promising “green shoots” in the economy that can only be nurtured if the finance ministry’s holistic package of measures to grow the economy are enacted. “No one measure will work,” Gordhan said, “our approach is to mobilise efforts across many fronts, and to recognise a diversity of contributions in an open and multi-faceted development framework.”Gordhan’s MTBPS once again reaffirms an approach to building a national consensus on development and transformation. The minister set out the aims of his budget:

  • The objective is inclusive growth.
  • Limits would be set on government debt and expenditure while the administration would encourage public and private sector investment.
  • The government-endorsed nine-point development plan would guide policy.
  • Broadening inclusive participation, growth and development will require multi- ministerial policy initiatives.

“All of us have expectations of government, of the economy and indeed of our political system. We expect delivery,” Gordhan concluded. “We expect change for the better. We expect progress in South Africa. Above all, we expect a better future for our children – particularly through education.”

SouthAfrica.info reporter

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