No more cash in tight times

2012-10-26 00:00

TIMES are tough and as a result Finance Minister Pravin Gordhan has put the brakes on government spending, announcing yesterday that no extra money would be allocated to the national kitty over the next three years.

Presenting his Medium Term Budget Policy Statement (MTBPS) in Parliament, Gordhan said that over the next three years, “public expenditure will remain at the level set in the 2012 Budget”.

This was the first time in South Africa’s democratic history that a finance minister has not used the opportunity to revise planned expenditure upwards.

“There will be no additions to the overall spending level.”

The key MTBPS numbers spoke volumes about the turbulent economic environment the country had endured in recent months — a far cry from the rather more upbeat 2012 National Budget Speech in February 2012:

• the revenue collection is expected to be R5 billion less this year than the February estimate;

• the Treasury forecasted economic growth this year to average 2,5% instead of 2,7% estimated in February 2012, and it expects growth of three percent next year — down from the 3,6% forecasted in February 2012;

• the Budget Deficit as a percentage of GDP has widened marginally, coming in at 4,8% in the current year, instead of 4,6% forecasted in February 2012. It is expected to narrow to 3,1% in 2015/16.

However, Gordhan stressed that the MTBPS was a statement of fiscal discipline rather than austerity, to maintain a balance between stimulating economic growth and maintaining sustainable national debt levels. He said South Africa was not going to “fall off any fiscal cliff of any kind”.

There was further emphasis on spending money on infrastructure, which already amounts to about R845 billion in terms of the current construction programme.

About R250 billion was set aside for “shovel ready” infrastructure projects over the next three years.

However, Gordhan warned: “There will be changes in the way our infrastructure conditional grants are managed. Cash flows will be linked to actual project delivery, and technical support programmes will be stepped up. We need to see substantial improvements in infrastructure management in many departments and municipalities if we are to succeed in building the capacity required for a faster growing economy and better living conditions for all.”

He reaffirmed his view that the recent ratings downgrades by Moody’s and Standard and Poor’s were unwarranted.

The rand firmed as much as 8,685 to the dollar from Wednesday’s R8,78 close.

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