Thursday, October 28, 2010

Highlights from the South African Medium Term Budget

Minister of Finance, Pravin Gordhan, delivered the Medium Term Budget in Parliament on October 27, 2010.

Key Highlights of his speech:

Former President Mandela once said: "After climbing a great hill, one only finds that there are many more hills to climb!"

Our successful hosting of the World Cup earlier this year is surely proof that no hill is too steep. As we move out of the depth of the greatest recession since the 1930s, we find yet another hill facing us - the highest, perhaps, we have yet had to climb. This is the creation of jobs and the reduction of poverty.

Our central goal is unequivocal: we have to accelerate growth in the South African economy, and we have to do so in ways that rapidly reduce poverty, unemployment and inequality.

I need to stress, Honourable Members, that the design of a growth strategy is the first step. Our next challenge is its implementation - aligning our policy and programmes, managing infrastructure project contracts, supporting accelerated business investment; actually delivering on the outputs and activities that are now documented in outcome statements, delivery agreements and strategic plans for every government department, every public entity, every state-owned enterprise, every municipality. All of us, every minister is committed to this.

We are strengthening our capacity to root out corruption and waste.

Honourable Speaker, South Africa was recently ranked first amongst 94 countries in the International Budget Partnership's Open Budget Survey, which assesses the degree to which governments provide sufficient budget documentation to allow for public participation, understanding and oversight in national budget decision-making.

Growth in Sub-Saharan Africa is expected to accelerate from 2.6 per cent in 2009 to 5 per cent in 2010 and 5.5 per cent in 2011 as commodity prices remain high, exports recover and domestic demand accelerates.

It is notable that in 2009, real spending on education and health increased in 20 out of 29 low-income regional economies.

At this stage, we expect overall growth of 3 per cent in 2010 rising to 3.5 per cent in 2011 and 4.4 per cent by 2013. Employment and private investment are expected to rise gradually as growth accelerates. Growth in real gross fixed capital formation is expected to rise from an estimated 0.8 per cent in 2010 to 5.6 per cent in 2011 and 5.9 per cent by 2013.

Capital flows to emerging markets have increased steadily over the past decade, supported by favourable growth dynamics, improved credit ratings, greater openness and the development of domestic financial markets. Net private capital flows to emerging economies could reach US$825 billion in 2010, up from US$581 billion in 2009. Fixed income investments will reach a record of US$70-75 billion in 2010.

In South Africa's circumstances, a careful balance needs to be found between continued real growth in expenditure, while reducing the future interest cost burden on the fiscus, so that expenditure growth can be sustained. Where we have to borrow, we will do so mainly to invest in infrastructure that contributes to building productive capacity. Improved delivery of services also requires that we use resources more efficiently, reduce waste and combat corruption.

Procurement and tender fraud to the value of nearly R25 billion is currently under investigation.


Pravin Gordhan's Speech (Listen)
Full Links to Medium Term Budget Statement and Adjusted Estimates of National Expenditure