Cape Town - In spite of a global economic slowdown and moderate revenue growth, government's priority over the next three years will be to step up social expenditure, keeping income support for the poor as one of the fastest-growing categories of public expenditure, while at the same time mitigating against the effects of the global economic meltdown.
As outlined in Finance Minister Trevor Manuel's medium-term budget policy statement (MTBPS), which was tabled in parliament on Tuesday, government's public spending will increase by R171bn more over the next three years compared to the R81bn increase allocated in last MTBPS.
While R58.7bn of the R170bn will be for inflation-related adjustments to maintain the purchasing power of existing spending plans and a further R50bn will be taken up by a loan to Eskom, the R63.7bn left will prioritise new policies and real increases for schools, hospitals, police, public transport, industrial support, housing, water services and rural development.
Paying for this in the face of reduced revenue collection will mean shifting the budget balance, including social security funds, into a moderate deficit (1.6% of GDP next year).
"It is the early decisions we took on fiscal management that allow us to adapt in the face of these more difficult circumstances, to protect public spending, to support investment and to contribute towards higher growth in the future without eroding the sustainability of our budget framework," said Manuel.
"We will continue to expand and improve the quality of public services and, most importantly, we will continue to take steps to protect the poor and vulnerable. We take these steps because we know that the storm will pass. Liduduma lidule. We do this because we will always put people first."
In sync with the ANC's priority areas as adopted at its landmark leadership conference in Polokwane in 2007, Manuel says that the strong growth in public spending on infrastructure and services is designed to give priority to enhancing education, improving health care (particularly for the poor), reducing crime, decreasing rural poverty and expanding the built environment to improve public transport as well as access to housing, water, electricity and sanitation.
While Manuel underscored the urgent need for the state to be more efficient in spending the budget, allocations for education - which lies at the centre of South Africa's long-term growth and redistribution strategy - will increase annually by 10.4% over the next three years.
Extra funds will extend school nutrition programmes (R344m), the tertiary education sector's student financial aid scheme (R390bn) as well as the sector's science, engineering and technology offerings. School infrastructure, including a new conditional grant for recapitalising technical high schools, will also be given precedence.
The budget baseline for the department of health will also grow by 10.7%, prioritising employing more staff and rolling out vaccines to reduce infant and child mortality.
While housing will be allocated a further 11.3% each year for the medium-term period, justice, police and prisons will receive an annual 11% and over during the next three years. Manuel expects South Africa to have an additional 200 000 police officers on the beat by 2011.
Highlighting crime as a "pressing" challenge, adjustments in Manuel's MTBPS will pay for the restructuring of the criminal justice system which is billed as work that will produce "a more modern, efficient and integrated system".
Funding priorities include the roll-out of an integrated docket management system, a case management system and upgrading all police stations as well as the national fingerprint identification system. The anticipated tab for six new prisons focusing on rehabilitation is also built into Manuel's increased allocations.
The Minister of Social Development, Zola Skweyiya, will receive an additional 10.9% every year for the next three years. This will cover the cost of widening the welfare net.
As from this month, R20 more a month will be added to grants received by pensioners, war veterans, the disabled and children. The age limit for the child support grant will also be raised to 15.
In addition to these priorities, several cross-cutting themes are likely to be reflected in the 2009 budget. These also echo the resolutions taken by the recent ANC alliance economic summit and include support for employment creation and initiatives to improve the state's capacity to spend money.
- Fin24.com