Jobs, anti poverty spending crunch issues in SA budget

February 23, 2011

, CAPE TOWN, Feb 23, 2011 – Finance Minister Pravin Gordhan presents his budget Wednesday having to find the money to pay for massive job creation and anti-poverty schemes to satisfy South Africans desperate for work and a future.

The spending figures for Africa\’s largest economy will be tabled at 1200 GMT in parliament Wednesday after the latest data showed the economy growing a helpful 4.4 percent in the fourth quarter of 2010 and 2.8 percent for the year.

Gordhan predicted in October that growth would rise to 3.5 percent this year but warned that faster growth was needed to get more South Africans working.

"Finance Minister Pravin Gordhan tables his second budget in better circumstances than those prevailing a year ago," said the Nedbank group, citing a better economic climate and improved finances.

"However, the task remains difficult. While the deficit is still high and needs to be brought under control over the medium term, government has announced an ambitious job-orientated growth plan that needs more substantiation in the budget."

The government is chasing seven percent growth over the next 20 years and wants the economy to create five million jobs so as to cut unemployment to a still high 15 percent within a decade from a longstanding average of around 25 percent.

Fresh protests over unemployment — officially at 24 percent — and dire living standards in poor townships have renewed pressure on the state ahead of local government polls expected by end May.

Gordhan will likely detail President Jacob Zuma\’s plans for a nine-billion-rand ($1.2-billion, 919-million-euro) job creation fund, 20 billion rand in tax breaks for the manufacturing sector and a 10-billion-rand loan scheme.

But he must also juggle huge spending demands for the education, health, housing and welfare systems that provide a crucial safety net for nearly one in three South Africans.

Last February, more than half of Gordhan\’s more than 900-billion-rand budget went on social services.

Ramped-up targets in the future include a looming national health insurance and pension system, while the state also plans roll-outs of a student bursary system and welfare grants to children aged up to 18.

To rein in a soaring rand, Gordhan in October eased exchange controls and said South Africa would continue to buy foreign exchange, warning that the currency\’s gains had created difficulties for businesses and threatened jobs.

"With the exchange rate dropping by 8.5 percent since the beginning of 2010, Frost & Sullivan believes it is unlikely that further exchange reforms will be proposed," the consulting firm said of the budget.

In October, Gordhan predicted that South Africa\’s growth would reach 4.4 percent by 2013, while the budget deficit would narrow from 5.3 percent of Gross Domestic Product in 2010 to 3.2 percent by 2013.


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