Amid a global economic outlook which continues to remain uncertain, the Minister of Finance Pravin Gordhan today presented a circumspect, yet upbeat Budget Speech detailing how the infrastructure projects highlighted by President Jacob Zuma earlier this month would be funded.
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Gordhan also called on South Africans – including the corporate sector which has millions locked up in savings – to take advantage of opportunities in emerging markets and in the continent.
Revenue for 2012/13 is forecast at R904.8bn – 27.4% of gross domestic product (GDP) – and expenditure at R1.058 trillion, resulting in a budget deficit of 4.6% of GDP for the 2012 financial year.
But Gordhan said the country’s finances remain in good health, and pointed out that the deficit would be brought down to three percent of GDP by 2014/15.
Government borrowing is also expected to moderate as the economy recovers and as fiscal consolidation proceeds, with public debt peaking at 38.5% by 2014 – up from 36% in the next financial year.
He also revealed that while 365 000 jobs were added in the year to December 2011, unemployment remained high at 23.9%.
Over the next three years, imports are projected to grow quicker than exports, such that the deficit on the current account would widen from 3.3% in 2011 to 4.4% in 2014.
Inflation is expected to rise from five percent in 2011 to 6.2% this year, before tapering off to 5.1% in 2014.
South Africa’s projected inflation this year however is lower than the average expected for sub-Saharan Africa (8.3%) and in line with that of emerging economies (6.2%).
Gordhan also announced R9.5 billion in personal income tax relief; revealed further measures to increase tax compliance; announced tax credits for medical-aid scheme contributions and proposed measures to get households to save more.
He said changes to procurement policies and practices would be made and tough enforcement introduced to tackle fraud and corruption.
Financial management in the public sector would also be strengthened to ensure that taxpayers’ money is used effectively.
The bulk of the government’s R1.06 trillion would, as in previous years, be spent on education, health and social assistance.
Much of this is helped by the additional R55.9bn the government has collected, to spend over the next three years.
This includes an additional R9.5bn for an economic competitiveness and support package – with R2.3bn of this going to special economic zones – R6.2bn for job creation and R3bn to fund the equalisation of subsidies to no-fee schools and the expansion of access to grade R.
One billion would also be allocated under this new amount, for national health insurance (NHI) pilots projects.
Other significant amounts include R4.7bn to be spent on solar-water geysers, R4bn for passenger rail coaches, R3.9bn to upgrade informal settlements, R1.8bn for municipal water infrastructure, R1.4bn for early childhood development and R1bn for rail signalling and depot infrastructure.
Government spending is expected to reach R1.1 trillion next year – double what the government spent in 2002/2003 in real terms.
Gordhan said the state would have about R4.5 trillion in consolidated resources available over the next three years, which would help fund its key infrastructure projects.
Tax revenue for the 2011/12 year has been revised up by R2.9bn – to R738.7bn and the National Treasury expected to collect R828.7bn in the next financial year (2012/13).
Revenue from tax would stabilise at about 25% of GDP, while public sector borrowing is expected to decline from 7.1% of GDP in 2011/12 to five percent in 2014/15.
Gordhan said South Africa had to seize the opportunities presented by the changing world – which has seen massive economic growth in emerging countries, particularly India and China – while growth in advanced economies remains lack lustre.
He said in the last five years, the Chinese economy had expanded by 60% and India by 45%, but that advanced economies had barely shown positive growth.
“As a major mining economy, we should be benefiting more from the continued buoyancy in commodity markets internationally. We also need to take advantage of rising demand for agricultural and manufacturing goods,” he said.
He pointed out that about 85 million manufacturing jobs in China are expected to shift to other countries over the next few years.
“Do we have the right policies, conditions and boldness to enable South African businesses to gain from these intense shifts in the patterns of production and trade?” asked Gordhan.
The African continent presented another growing opportunity for South Africa.
He pointed out that Africa, is expected to be the second fastest growing region in the world – with sub-Saharan Africa growing at 5.5% this year, compared to Asia’s 7.3%.
“As well as developing South African business interests in the continent, we should use the strength and sophistication of our financial system to turn our country into a true gateway for investment into, and development of, Africa,” he said.
He called on a more dynamic partnership between the government, the private sector and civil society to take advantage of opportunities across Africa and the globe.
Gordhan also touched on Vision 2030, outlined in the National Development Plan, which is now receiving comments from the public before it is expected to go before President Jacob Zuma in the middle of this year.
Vision 2030 calls for among other things – lowering costs for households and businesses, increasing public infrastructure spending, growing the manufacturing and agricultural sectors, raising mining output, raising competitiveness and exports and improving the labour market.
In a media briefing before his speech today, Gordhan said if South Africa is to reduce inequality, all South African also had to ask themselves what they were prepared to sacrifice.
Download the entire 2012 Budget Speech (206 KB PDF)
Watch the 2012 Budget Speech:
Finance Minister Pravin Gordhan delivers South Africa’s 2012 budget at Parliament in Cape Town. To some the budget brings relief, while for others added pressure. In this part of the Budget Speech, the minister gives an overview for the 2012 National Budget.
In this part of the 2012 Budget Speech, the minister looks at the Presidential Coordinating Commission and clarifying long-term investment plans to drive economic change.
In this part of the Budget Speech, the minister looks at the global environment and the historic shift in economic power.
In this part of the Budget Speech, the minister looks at the economic outlook for South Africa and implementing strategies for faster and more inclusive economic growth.
Article source: http://mype.co.za/new/2012/02/20120-budget-speech/