South African budget promises faster growth

CAPE TOWN – Treasury Minister Trevor Manuel yesterday announced an annual budget of R473 billion, with emphasis on individual tax cuts and measures to spread the benefits of South Africa’s sustained economic boom to the poor.

He said that infrastructure, education, health and social welfare would be the focus of the increased expenditure – 28 per cent up on 2005/6 – and said this was possible thanks to better than expected tax receipts due to the strong economy and sweeping tax reforms. “The economic outlook is exceedingly favourable, more promising than has been seen in 40 years, but we recognize the need for both restraint and redoubled efforts so that we take full advantage of the opportunities before us,” Manuel said in a speech bordering on triumphant.The budget, which comes just ahead of March 1 local government elections, was packed with promises for the less fortunate and small businesses but contained little to excite big corporations.Manuel told parliament his government wanted “rich and poor to share the privilege of a common nationhood.”The People’s Budget Campaign, representing trade unions and anti-poverty groups, had urged Manuel to be bold.”Generally, we hear a lot about business expectations from the budget, which typically assume the benefits of tax cuts and a cautious fiscal policy.For the majority of South Africans, however, the key questions centre on how government will use its resources to drive programs that can create employment and overcome the social deficits left by apartheid,” it said.”It is now 12 years since the establishment of democracy.Yet South Africa still faces vast economic inequalities, which as the President has said virtually shape two worlds within this one country,” it said in a statement.It marked the 10th budget speech for Manuel, the world’s longest serving incumbent finance minister.The 50 year-old former anti-apartheid and housing activist, who trained as an engineer, has won universal acclaim at home and abroad for improving South Africa’s economic fortunes, increasing investor confidence and dramatically improving collection of taxes.There is speculation that after a decade in office, Manuel is looking for new challenges and his name is often mentioned for top international posts.With President Thabo Mbeki due to stand down as president in 2009, many business leaders would like to see Manuel as president, but this is considered unlikely.”Manuel has brought stability, he has bought long term predictability, he has brought pragmatism to the whole field of the budget and the economy,” said Chris Hart, senior treasury economist with the ABSA banking group.”The markets and Manuel have a mutual respect and mutual high regard for each other,” he said.At Manuel’s prodding, the government has set itself the target of halving unemployment and poverty by 2010.This requires a growth rate of at least six percent in gross domestic product – a target Manuel maintains is realistic.He said gross domestic product increased by an estimated five per cent – possibly as much as six per cent – last year, compared to an initial forecast of 4,3 per cent.He said preliminary indications were that South African exports grew by 12 per cent last year.But imports were also up, worsening the balance of payments deficit.The Reserve Bank’s foreign exchange position improved from US$14,9 billion at the end of December 2004 to US$22,2 billion in January 2006, largely thanks to strong commodity prices, he said.Labour force and household survey data indicate that job creation is now proceeding at about 350 000 new opportunities per year, or about 1 500 new jobs a day, he said.Despite the gains, official unemployment is nearly 27 per cent, but this does not include people who have stopped looking for jobs in disillusionment.In his speech, Manuel drew heavily from Nigerian author Ben Okri and waxed lyrical about the challenges South Africa has overcome since 1994 and the joys ahead.He also injected humour into the statistics.-Nampa-AP”The economic outlook is exceedingly favourable, more promising than has been seen in 40 years, but we recognize the need for both restraint and redoubled efforts so that we take full advantage of the opportunities before us,” Manuel said in a speech bordering on triumphant.The budget, which comes just ahead of March 1 local government elections, was packed with promises for the less fortunate and small businesses but contained little to excite big corporations.Manuel told parliament his government wanted “rich and poor to share the privilege of a common nationhood.”The People’s Budget Campaign, representing trade unions and anti-poverty groups, had urged Manuel to be bold.”Generally, we hear a lot about business expectations from the budget, which typically assume the benefits of tax cuts and a cautious fiscal policy.For the majority of South Africans, however, the key questions centre on how government will use its resources to drive programs that can create employment and overcome the social deficits left by apartheid,” it said.”It is now 12 years since the establishment of democracy.Yet South Africa still faces vast economic inequalities, which as the President has said virtually shape two worlds within this one country,” it said in a statement.It marked the 10th budget speech for Manuel, the world’s longest serving incumbent finance minister.The 50 year-old former anti-apartheid and housing activist, who trained as an engineer, has won universal acclaim at home and abroad for improving South Africa’s economic fortunes, increasing investor confidence and dramatically improving collection of taxes.There is speculation that after a decade in office, Manuel is looking for new challenges and his name is often mentioned for top international posts.With President Thabo Mbeki due to stand down as president in 2009, many business leaders would like to see Manuel as president, but this is considered unlikely.”Manuel has brought stability, he has bought long term predictability, he has brought pragmatism to the whole field of the budget and the economy,” said Chris Hart, senior treasury economist with the ABSA banking group.”The markets and Manuel have a mutual respect and mutual high regard for each other,” he said.At Manuel’s prodding, the government has set itself the target of halving unemployment and poverty by 2010.This requires a growth rate of at least six percent in gross domestic product – a target Manuel maintains is realistic.He said gross domestic product increased by an estimated five per cent – possibly as much as six per cent – last year, compared to an initial forecast of 4,3 per cent.He said preliminary indications were that South African exports grew by 12 per cent last year.But imports were also up, worsening the balance of payments deficit.The Reserve Bank’s foreign exchange position improved from US$14,9 billion at the end of December 2004 to US$22,2 billion in January 2006, largely thanks to strong commodity prices, he said.Labour force and household survey data indicate that job creation is now proceeding at about 350 000 new opportunities per year, or about 1 500 new jobs a day, he said.Despite the gains, official unemployment is nearly 27 per cent, but this does not include people who have stopped looking for jobs in disillusionment.In his speech, Manuel drew heavily from Nigerian author Ben Okri and waxed lyrical about the challenges South Africa has overcome since 1994 and the joys ahead.He also injected humour into the statistics.-Nampa-AP