Cape Town - Finance Minister
Pravin Gordhan anchored a budget just shy of R1 trillion on employment creation.
The bulk of public expenditure in 2011 will be motivated by job creation because “this has to become the principal barometer of South Africa’s progress”.
Warning that the 2011, R979.3bn budget sets the country on a path that will be “neither easy nor uncontested”, Gordhan stressed that spending had to be targeted at development rather than increasing “dependence on welfare”.
Quoting from a budget tip sent to him, Gordhan said: “Government must teach its people to fish; not be suppliers of fish. The latter is not sustainable; the government pond will never be able to supply more fish in 20 years than it is doing now to the ever-growing masses of people of this country. Let’s work to reduce dependency and give back dignity that was eroded by our past.”
He called on South Africans to recognise and act on the fact that now is the time to do extraordinary things in addressing the country’s developmental needs.
“It requires new ideas and bold efforts from all: government, business, labour, communities and every family.
"We must show, across the economy, the game-changing strengths we have shown on big issues, from creating our democracy to hosting Africa’s first Soccer World Cup festival.
"Now we have to ignite the flame of higher inclusive growth, and sustain it,” Gordhan told a joint sitting of the national assembly.
The main aim of this budget – Gordhan’s second – is to balance the state’s significant spending requirements with keeping the country’s debt under control.
Debt service costs will amount to R77bn next year, rising to R104bn in 2013/14 which is why Gordhan can only spend 9.1% more than he did last year.
He acknowledged that the improved terms of trade for South Africa had contributed to a better than expected current account deficit for 2010, which widened from 3.2% of gross domestic product expected this year to 5% in 2013. Government would like it to “reflect rapidly rising investment rather than higher consumption”, he said.
Cosatu hopes dashedGordhan dashed trade federation Cosatu’s expectations that inflation targeting would be adjusted or scrapped, adding that South Africa needed to continue along the path of fiscal prudence that had served it so well in "the Great Recession".
The key, he said, was to maintain macroeconomic stability because South Africa’s economy was integrally linked to a global financial system that was still unpredictable.
Referring to the volatility of foreign capital inflows and their effects, Gordhan said: “The growth and transformation of financial markets in recent decades has seen increased volatility of exchange rates and capital flows.
"Global commodity markets now account for significant fluctuations in prices for our energy imports, mineral exports, and food supplies.
"The macroeconomic environment facing South Africans – through interest rates, exchange rates, inflation, and credit conditions – can be destabilised by those international shocks. The macroeconomic policy task is to provide a stable and predictable economic environment by offsetting such shocks as far as possible.”
Gordhan expected inflation to stay within the Reserve Bank’s 3% to 6% target, edging towards the outer band in 2013. He warned, however, that there were significant inflationary risks on the horizon which had to be monitored closely.
- Fin24