Saturday, March 21, 2009

SA: Manuel fights economic downturn in 2009 budget

11 February 2009

Addressing Parliament in Cape Town on Wednesday, Finance Minister Trevor Manuel delivered what economists are calling a "very realistic" budget speech.

Pic: Werner Beukes / Sapa "Given the circumstances, the Finance Minister found a middle way between economics and politics," said Efficient Group economist Dawie Roodt.

Nedbank economist Dennis Dykes praised Manuel's support of low-income earners and the unemployed. "This is the right thing to do for this fiscal year, but we need to watch that in future fiscal years it doesn't become too big," he told The Times.

Manuel gave a sobering account of how the global economic crisis would impact on South Africa. "The storm that we spoke of last year has broken," said Manuel, "and it is more severe than anticipated."

Sharing the Treasury's economic forecast for the year, Manuel said that growth would drop to 1.2% for 2009, while the country's budget deficit would increase to 3.8% of GDP.

Manuel however added that South Africa would be spared from the worst of the global crisis. "A sound banking system, healthy fiscal position, credible monetary policy and appropriate foreign exchange regulations will continue to limit our exposure to the international downturn, while serving as key building blocks in financing future growth and development" he said.

The public expenditure plans tabled in the 2009 budget will be centred around what Manuel called the five enduring principles: protecting the poor, sustaining employment growth, building economic capacity and promoting investment, addressing the barriers to competitiveness and maintaining a sustainable debt level.

Key expenditure announcements include:

* R787 billion infrastructure investment over the next three years
* R25 billion to the budgets of provinces for education and health
* R13 billion for social assistance
o Old age, disability and care dependency grants would be increased to R1 010 per month
o Foster care grant increased to R680
o Child support grant increased to R240

* R5.4 billion towards improving the criminal justice system
o Part of this expenditure will go towards increasing the police force from 183 000 to 204 000 by 2011/12.

* R6.4 billion for public transport, roads and rail networks
* R13 billion personal income tax relief

Health expenditure will makes provisions for the extension of government's anti-retroviral programme to cover 1.4 million people by 2011/2012. The programme currently reaches 630 000 people.

Manuel announced that mineral and petroleum royalties would not be introduced this year as originally intended, but rather in 2010. "This provides a boost to the industry of about R1.8 billion, which will assist in minimising job losses," he said.

"Trevor Manuel realises that our economy is taking a serious smack," Roodt told Sapa "and measures like delaying mining royalties will help."

A not-so-popular allocation was the R1.6 billion for South African Airways. MPs booed the allocation to which Manuel responded; "I am sure that the House will agree with my hope that this will not be a recurring allocation."

Despite an endearing 'tip for Trevor' in which an elderly gentleman asked for some leniency on whiskey tax, Manuel raised the price by R3.21. Cigarettes will go up by 88c while the fuel levies will go up on the 1st of April by 23 cents and 24 cents for petrol and diesel respectively.

Manuel ended his speech by quoting former president Nelson Mandela's call for unity, spoken during his first public address after being released from prison exactly 19 years ago to the day.

Manuel called on all South African's to muster courage for the road ahead and most importantly, to remain united.

To read the full text of Trevor Manuel's 2009 Budget Speech visit: