Holding the centre

2008-10-23 00:00

Minister of Finance Trevor Manuel assured the nation in his medium-term budget policy statement (MTBPS) in Parliament this week that South Africa remains essentially stable despite the devastating effects of the financial and economic turmoil in the United States and Europe. This is a tribute to the combination of boldness and caution that he has displayed in the national treasury. He made the point that if the government’s economic policies had been populist and short-term, the country would now be facing the prospect of long-term misery. Instead, he has taken the long view and created the financial ballast needed to ride out the storm now.

It is true that in South African society generally the rich have tended to become richer and the poor poorer. This does not mean that aid has been withheld from the poor. On the contrary, a large slice of the annual budget has been spent on social grants while job creation has also been a feature of the government’s best intentions. This week’s MTBPS announced a modest increase of R20 a month in all grants in order to help counter the current escalation in the price of food. Over all, despite alarming global trends, Manuel plans to spend an extra R170,8 billion during the next three years. Greater consideration will need to be given to the reduction of poverty which remains a serious blot on the socio-economic landscape.

The finance minister walks a tightrope, balancing fiscal discipline with the creation of a more equitable society. There are prominent voices in the African National Congress and its alliance which are pressing for a faster and more vigorous emphasis on social spending. With the imminent recession in the world economy, growth rates will be slower, as Manuel has been quick to point out. In such a climate rash decisions, no matter how commendable in principle, will be very unwise. The fact that President Kgalema Motlanthe decided to retain the services of Manuel in his cabinet is a clear indication that he wants policies to stay on track.

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