Finance minister, Pravin Gordhan, said today that he wanted to reassure South Africans that the country had a solid fiscal framework and that there was enough money in the system to provide economic support and for immediate needs.
Briefing journalists ahead of his medium term budget policy statement (MTBPS), he said that South Africa would not ‘fall over a fiscal cliff’ and that there was no need for pessimism, adding: “There are too many people making judgement calls outside of our country. They don’t understand our history well enough; don’t understand where we come from as a country and as a political culture and they make negative pronouncements that are well out of line.”
No spending increase
Presenting his MTBPS, Gordhan told the National Assembly that there will be no additions to the overall spending level. “For the MTEF period ahead, public expenditure will remain at the level set in the 2012 Budget, in keeping with sound medium term fiscal guidelines.”
He revealed economic growth in South Africa has slowed to just 2.5% (down from a projected 2.7%) this year, held back by both global uncertainty and disruptions to domestic productions. “This means that expenditure growth in real terms is limited to a rate of 2.9% a year over the next three years. Additional resources to support the economy will be generated from efficiency gains, savings and reprioritisation,” said Gordhan.
Revenue collection is expected to be R5 billion less this year than the February estimate and the budget deficit is projected to be 4.8% of GDP in the current year. He said he expected the budget deficit to narrow from 4.8% to 3.1% of GDP in 2015/16. Gordhan added that government debt will be stabilised at about 39 percent of GDP in 2015/16.
Job cuts?
During the media briefing Gordhan said that billions of rand could perhaps be saved by identifying ‘ghost and surplus workers’. The Treasury said in a statement: “Over the period ahead, government will take a more deliberate approach to managing overall employment and wage trends across the public sector including state-owned entities. In particular, government will curtail unwarranted growth in personnel numbers.”
Impact of strikes
The National Treasury estimates that the total value of production lost as a result of platinum and gold mining strikes since the beginning of the year has amounted to R10.1 billion. It added that this has impacted related industries including manufacturing, logistics and services with negative consequences for GDP, tax revenues, exports and employment. Gordhan said the impact will be larger if strike cavity is protracted.
Rating agencies Moody’s and Standard & Poor’s (S&P) both downgraded South Africa’s credit rating recently, warning that further downgrades were on the way. Gordhan admitted that South Africa had ‘witnessed a crisis of labour relations in the mining sector, with tragic consequences in Marikana’ and that the country had seen mismanagement of supplies and schools and hospitals but added that Moody’s and S&P had inappropriately downgraded the country’s ability to service its debt.
Spending highlights
• The largest share of consolidated expenditure goes to the education function, which will spend R234 billion next year.
• Health care accounts will get R132 billion for 2013.
• Social protection spending is projected to be R136 billion next year comprising social assistance grants, unemployment insurance, road accident benefits and various social development and welfare services.
• Local government, housing and water services will be allocated R133 billion in 2013, budgeted to grow nine percent a year over the MTEF period.
• Economic support functions, investment and transport infrastructure and services will be allocated R80 billion.
• Treasury will allocate R152 billion in the fight against crime for 2013.