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Cape Town - Government spending over the medium-term expenditure framework (MTEF) period ahead will remain at the level set in the 2012 budget, Finance Minister Pravin Gordhan said on Thursday.
"There will be no additions to the overall spending level," he told the National Assembly while presenting his 2012 medium-term budget policy statement (MTBPS).
This meant that spending growth in real terms was limited to a rate of about 2.9% a year over the next three years.
Additional resources to support the economy would be generated from efficiency gains, savings and reprioritisation, Gordhan said.
Real GDP growth was expected to be about 2.5% this year, increasing to 3% in 2013 and 4.1% in 2015.
Factors that would contribute to an improved medium-term performance include expanded public sector infrastructure investment, new electricity generation capacity and strong regional growth.
"A substantial accumulation of cash in the corporate sector is available to finance stronger investment, once confidence and growth prospects recover," he said.
As revenue recovered alongside economic growth, the budget deficit would narrow from 4.8% in the current year to 3.1% of gross domestic product (GDP) in 2015/16.
Government debt would be stabilised at about 39% of GDP in 2015/16.
South Africa's fiscal response to the global economic crisis had been among the strongest in the world.
Government spending grew from 28% to 34% of GDP in the wake of the recession.
"Our deficit widened by 6% of GDP between 2007 and 2011. We were able to sustain spending programmes as revenue fell, partly because our fiscal position before the crisis was so healthy.
"We have added more than R1 trillion to government debt, because of the recession," Gordhan said.
Despite the size of the fiscal stimulus, reinforced by accumulative monetary policy, South Africa's economic recovery "has been tepid".
Investment, trade and employment growth had remained hesitant. Part of the explanation was the weakness in the global recovery.
"But we also have to look within ourselves - we have to ask what reforms we can implement to give greater impetus to investment, business development, and job creation," he said.
Because the economic recovery was slower than anticipated, the budget deficit would be reduced more gradually.
In this way, the fiscus played its part in ensuring that the recovery gained greater momentum over the period ahead, while ensuring that public debt remained sustainable.
"Ours is a sound and sustainable fiscal position," he said.
The MTBPS proposed a national budget of R1.05 trillion in 2013/14, R1.14 trillion in 2014/15, and R1.23 trillion in 2015/16.
Just under 10% of the total, or R98.6bn next year, would be spent on debt service costs.
Consolidated revenue was expected to grow from R986bn next year to R1.2 trillion in 2015/16.
Gordhan said the global economy, particularly the developed countries, would be in difficulty for some time.
"As South Africans, we need to dig deep into our reservoir of goodwill, ingenuity and resilience to find new ways of implementing our plans, creating jobs, and generating inclusive growth.
"As government, we commit to working within the sustainable and manageable fiscal framework that is outlined [in the MTBPS] and that will remain in place for the next three years and beyond.
"As a country, we face difficulties, but we are not in terminal crisis. Let us set about proving the pessimists wrong, working together to fulfil our vision for a strong, prosperous, and united South Africa," he said.
