Johannesburg - The local economy can grow much faster than the 4.2% government forecast if the country can get entrepreneurship and skills development right, said Finance Minister Trevor Manuel.
He said unlocking entrepreneurship and improving the skills in the economy would lead to more people leaving unemployment queues to start their own businesses and paying tax, which would contribute to higher economic growth.
Manuel says the entrepreneurship levels and skills of average South Africans was low.
"Whichever town you go to you find people who are new to South Africa running shops. They do so without government support and networks. They see and make opportunities for themselves," he said.
"Macro-economic stability, which we have, is necessary but not sufficient."
Manuel is passionate about skills development and said the society needed to review the value it put on non-specific university education over technical training.
South Africa has three in 10 people of working age without a job. The figures on employment trends suggest that this figure is shrinking marginally.
Manuel delivered the nation's numbers and financial policies with eloquence and calm.
Spending-induced growth
"I am probably as nervous before delivering the Budget speech now as I was when I made my first speech," said Manuel on Friday.
He was speaking before joining a National Economic Development and Labour Council on the Budget he had introduced in parliament two days earlier.
This year Manuel put back R6.8bn into the pockets of consumers, whose appetite for spending is fuelling growth. He was also instrumental in bringing the company tax rate from 48% in 1994 to the proposed 29%.
He said middle-income earners who are taxed at 40% when they earn R250 000 a year start paying the tax rate too soon.
This suggests that the Treasury may, in years to come, increase the earnings threshold before employees start paying the highest tax rate.
Manuel said the government continued to give tax cuts to assist inter-generational change and ensure that people are not worse off after receiving annual salary increases.
Pravin Gordhan, commissioner of the SA Revenue Service, said in a developing country like South Africa there were opportunities to increase the tax base as people went out to start businesses.
"There is a history of people not registering for tax purposes and we are now getting more money from people with more than one source of income," he said.
Gordhan's sucess in raising more money from taxes has been one of the reasons Manuel has been able to offer tax cuts.
Employ more people
To help stimulate job creation Manuel announced measures to decrease the costs of doing business for small and medium companies and cut administrative red tape.
He said that the tax benefits on their own will not make companies employ more people.
"Key issues are in the arena of support for small business, lowering tax rates and assisting with investment by the improved depreciation allowance.
By maintaining an interest on the macro-economic stability we have been able to bring the cost of capital down to the lowest point in 20 years. Cheaper capital definitely reduces the cost of doing business," said Manuel.
He said the decision to exempt companies with a turnover of R500 000 was taken because the funds were too little to make a difference to training.
Manuel said getting the buy-in of other role players was important in getting the proposed changes to work.
He said the Treasury was happy with the inclusion of workers in high-profile empowerment transactions after the department had relaxed the regulations on employee share ownership schemes last year.
But the announcement of measures to improve the facilitation of empowerment for bigger players are not likely to be forthcoming.
Facilitale empowerment
Manuel announced a R400m allocation to the National Empowerment Fund (NEF) to allow it to better meet its mandate.
The NEF has been without a leader for some time after former chief executive Sydney Maree left amid allegations of mismanagement.
The fund finances entrepreneurs through loans of R250 000 for seed and start-up capital.
Manuel said the Treasury's focus would be on improving the environment for smaller businesses, which often miss the headlines, to facilitate empowerment.
He said the country could attract foreign direct investment if it could have stronger trade links with the rest of Africa to create larger markets.
"The efforts of creating peace and stability on the continent are crucial," he said.