Worthy budget

2009-02-12 00:00

FINANCE Minister Trevor Manuel’s 13th Budget speech could be his last. For over a decade he has been a stabilising influence: keenly aware of the economic and political dangers of excessive national debt in a developing economy, he has exercised strict fiscal discipline.

Yesterday he presented a Budget crafted in circumstances he termed stormy. The world economy faces a fundamental crisis of confidence in financial institutions created by greed and lack of oversight. Manuel pointed correctly to the folly of unregulated capitalism. Indeed, tough regulation plus a resilient economy have so far spared South Africa the worst.

Nonetheless, forecast growth dipping to 1,2% means that tax income will shrink by R50 billion. So Manuel has broken his general rule and decided on a deficit budget of nearly four percent. It’s risky, but a supportable strategy given South Africa’s history of sustainable debt and good budgetary housekeeping.

There is consensus on a need to stimulate the economy while providing a safety net for millions of the poor. This has indeed been the hallmark of Manuel’s past budgets. He believes economics is about people. South Africa is already a massive welfare state in which there are more social grant recipients than taxpayers and a further R13 billion has justifiably been added to the bill.

Job creation has become a political cliché, ignoring a globalised world in which the ability of national governments to create employment has been severely curtailed. However, leeway remains in infrastructure development, ironic affirmation of the economic theory of John Maynard Keynes long derided by free market believers who created the current crisis. Investment of R787 billion over three years is probably the most significant item in the Budget.

It is hard to think of anything more appropriate for South Africa than an expanded public works programme given failing water and sanitation systems and poor transport facilities. The Budget correctly recognises that this will only have lasting value if it involves skills development for more prosperous times when the workforce can move to the private sector.

The developing character of the South African economy and the fragile nature of its democracy require long-term growth prospects with safeguards for the less fortunate. Globalisation demands massive upgrades in the education and health systems to produce a fit and productive workforce. Without these South Africa will end up in the backyard of the international system and the budget recognises the danger, focusing in particular on quality control. Manuel was right to emphasise that education is an investment.

His biographer records vividly Manuel’s utter frustration that every year he allocates generous budgets only to see them mismanaged and even misappropriated. Ultimately, far more important than the numbers involved is the ability to spend wisely for the greater good. The minister commendably left the nation in no doubt about that yesterday. He earned his standing ovation.

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