Bua Briefs - 2010 Budget highlights

19 February 2010

Special Edition
 

1. Economic Development

South Africa’s structural economic challenge

The key dimensions of our transformation challenge are clear and well-known.
 

  • One in four adults seeking work is unemployed, and almost half our young people have not found work.
  • Income inequality is among the highest in the  in the world; and half of our population survives on 8% of national income.

New growth path

This budget outlines several aspects of a new growth path for our country:
 

  • a concerted effort to reduce joblessness among young people
  • support for labour-intensive industries through industrial policy interventions, skills development, public employment programmes and a rural development strategy
  • sustaining high levels of public and private investment and raising our savings level
  • reforms to increase inclusion and participation in the labour market, alongside efforts to improve competition in product markets
  • keeping inflation low, striving for a stable and competitive exchange rate, and providing a buffer against global volatility
  • raising productivity and competitiveness, and opening up the economy to investment and trade opportunities that can boost exports.

Industrial policy
 

Industrial Policy Action Plan
 

  • As part of our growth path, it will contribute to transforming our economy toward a more labour-absorbing and dynamic one.
  • Climate change and concerns over global energy supply present both challenges and opportunities for South Africa.
  • Industries must be helped to manage scarce resources more efficiently and reduce greenhouse-gas emissions through the appropriate pricing of energy.
  • Green-economy initiatives will create new opportunities for enterprise development, job creation and the renewal of commercial and residential environments. This must play a part in our new growth path.
  • Innovation and enterprise development are rightly the key focus areas of the work of the Economic and Employment cluster.
  • Over the next year, the cluster will oversee the development of sectoral strategies and actions to raise output, employment, productivity and exports.

Measures to promote youth employment

Another component of our employment strategy is to promote job creation for our youth.
 

  • Under the leadership of the Department of Labour, initiatives are in progress to improve information services to help young people access jobs and training opportunities. This will be in the form of a subsidy to employers that will lower the cost of hiring young people without work experience.
  • It is estimated that about 800 000 people will qualify.
  • The aim is to raise employment of young school-leavers by a further 500 000 by 2013.

Monetary policy
 

  • National Treasury and the Reserve Bank will consult regularly to ensure that South Africa is prepared to respond quickly and with flexibility to changing circumstances.
  • The Reserve Bank will continue to pursue a target of consumer price index inflation of 3% to 6%.
  • The Reserve Bank will also continue to take steps to counter the volatility of the exchange rate.

Fiscal policy and the management of public debt
 

  • The budget balance has increased from a surplus of 1% of gross domestic product (GDP) in 2007/08 to a deficit of 7,3%.
  • Public debt is expected to rise from 23% of GDP in 2008/09 to about 40% in 2013. This is expected to stabilise in 2015.

Revenue estimates
 

  • Government expects to raise R69 billion less in tax this year than budgeted.
  • Consolidated budget revenue will be R658 billion in 2009/10, which is R32 billion less than in the past fiscal year.

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2. Infrastructure Development

Infrastructure investment and development finance
 

  • Over the next three years, the public sector aims to spend R846 billion on its infrastructure programme.
  • Government has taken action to recapitalise our development finance institutions to allow them to step up their lending to municipalities, land reform programmes and businesses in distress due to the economic crisis.
  • Allowance has been made for the recapitalisation of the Land Bank to the value R2,5 billion. A guarantee of R15,2 billion has been approved for the Development Bank of Southern Africa, enabling it to extend capital to poorer municipalities for infrastructure projects.
  • The Industrial Development Corporation will continue to play a key role in implementing government’s Industrial Policy Action Plan.

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3. Governance and administration (G&A)

The budget outlined several aspects in relation to the G&A Cluster:
 

  • The consolidated budget of government for next year is R907 billion over the next three years and R112 billion has been added to the baselines of departmental budgets.
  • A portion of the budget has been allocated to provinces and municipalities for education, health, municipal infrastructure and human settlements, which are reflected as key priority areas of government.
  • Real growth in public spending over the next three years is about 2% a year.
  • Prudent measures have been put in place to assist the Department of Cooperative Governance and Traditional Affairs in resolving service-delivery challenges by improving financial management and minimising higher spending.
  • Further engagements will be made with Perfomance Monitoring and Evaluation to conduct comprehensive evaluations of several key spending areas aimed at eliminating ineffective programmes and generally improving value for money.
  • Government will moderate salary increases  to ensure that funds are available for growth in public service employment to ensure that spending on schoolbooks, hospital building and the maintenance of infrastructure is not compromised.

Local government
 

  • Local government equitable share receives a further R6,7 billion to support municipalities to cushion poor households against the rising cost of electricity and water.
  • An Additional R2,5 billion is allocated for the Municipal Infrastructure Grant.
  • Total allocations of municipalities rise from R55 billion in 2009/10 to R78 billion in 2012/13.

Combating fraud and corruption
 

  • Additional funds have been allocated to bolster efforts to strengthen supply chain management, and the relevant government departments have intensified efforts to bring perpetrators of tender fraud to book.
  • The National Treasury will establish a unit to investigate tender corruption in provincial governments as part of government efforts to stem corruption relating to state tenders together with the anti-corruption commission announced last year.

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4. Human Development

Health
 

  • The total national and provincial health spending is projected to be R105 billion next year.
  • The monthly monetary caps for deductible medical scheme contributions are also increased to support further broadening of access to medical scheme membership.
  • A further R3 billion is allocated to broaden access to those co-infected with TB and women and children with CD4 counts lower than 350. Presently, about 920 000 people are on anti-retroviral treatment and the budget provides for the number to rise to 2,1 million in 2012/13.
  • Government will continue to broaden the use of public-private partnerships (PPPs) in the health sector, in particular to improve our hospital system. The flagship PPP hospital project will be Chris Hani Baragwanath, for which a feasibility study is now complete.
  • The new George Mkhari and Polokwane academic health complexes are being fast-tracked.

Education
 

  • The total budget for education next year is R165 billion.
  • To roll out workbooks in all 11 official languages to help raise our literacy and numeracy levels and to test all learners in grades three, six and nine, a further R2,7 billion is allocated to the Department of Basic Education.
  • Government has set targets to expand the number of young people studying vocational subjects. The budget for Further Education and Training (FET) colleges of R12 billion over three years, has been shifted from provinces to the national department.
  • A further R1,3 billion is allocated to improve the salaries of FET college educators.

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5. Social Protection and Community development

Rural development
 

  • In addition to the funds allocated to the Department of Rural Development and Land Affairs for the Comprehensive Rural Development Strategy, government is setting up a new grant to support on-site water and sanitation infrastructure as part of the Rural Housing Programme. An initial R1,2 billion over three years is provided.

Human settlements
 

  • Government and the banks will work together to find appropriate financing support measures so that more people can access home loans.

Extended Public Works Programme (EPWP)
 

  • Over the 2009 – 2014 period, the second phase of the EPWP aims to create 4,5 million short-term job opportunities. An estimated total of R52 billion is available for various EPWP projects over the next three years.

Social grants
 

  • In 2010/11, R89 billion will be spent on social grants. Provision has been made for the phased extension of the Child-Support Grant (CSG) up to a child’s 18th birthday.
  • The State old-age pension and the Disability Grant rise by R70 to R1 080 a month. The CSG increases by R10 to R250 a month.

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