Mernat Mafirakurewa, AfricaNews reporter in Johannesburg, South Africa
The South African government plans to spend R780 billion (USD$78,596,646) in the next five years hoping to create some four millions jobs. At the same time, government's huge programme of infrastructure spending will continue unabated, stated Finance Minister Trevor Manuel on Wednesday.
Presenting his 13th national budget, Manuel said the proposal meant that last year’s budget surplus has now become a deficit equal to 3.8 percent of the Gross Domestic Product.
He however emphasized: “Although the budget deficit will rise to 3.8% of GDP next year, debt service costs will remain moderate over the next three years, at about 2.5% of GDP”.
Although there was no repeat of last year’s cut in the corporate tax rate, the budget contained some business-friendly proposals. In a move designed to offer relief to mining firms, who have seen the price of their products collapse and have been forced to retrench thousands of workers, Manuel announced the implementation of the mining royalty act would be delayed until 2010.
He also announced extensions to programmes such as a R1.6 billion addition to industrial development and small enterprise support programmes, and R1.8 billion extra for rural development and small farmer support.
The Finance Minister said the government’s decision to borrow substantially more had been prompted by the need to keep its R 787bn infrastructure spending programme on track, helping SA to weather the global storm.
“One of the things that makes policy-making difficult right now is that levels of uncertainty have never been greater,” he told reporters during a briefing yesterday.
“If the circumstances change we will have to come back and say (so) … but for now these are the best estimates we have and they are substantially lower than we had last year,” he added.
The budget deficit was expected to shrink to 3.1% of GDP next year and 2.3% of GDP in financial 2010- 11, the treasury’s review said.
Manuel predicted that economic growth in SA for 2009 will be just 1.2%, far short of government’s targeted 6%, but not unexpected given the global economic climate. In such an environment, he argued, government has a responsibility to both protect the poor and vulnerable and to invest in infrastructure and programmes that create jobs and benefit the economy.
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