Dec 2014 / Jan 2015

Government wants to boost the economy

Written by Amukelani Chauke
Government is implementing financial interventions to boost the economy in order to increase economic participation to create jobs and extend income support to the most vulnerable.

Finance Minister Nhlanhla Nene recently tabled government’s Medium Term Budget Policy Statement, also known as the mini-budget, and announced that due to low tax revenue and other economic constraints, government needs to lower its expenditure spending ceiling in order to save R1,3 billion over the next two years.

But, the Minister said, all social grants will be safe and will not be affected by austerity measures.

“We have achieved much over the past twenty years: we have expanded education and health care, broadened economic participation and extended income support to the most vulnerable.

“But we are not making enough progress in raising incomes or reducing poverty. Far too many people are unemployed, which deepens inequality and heightens vulnerability,” he said.

Tough economic climate

The National Treasury has revised the country’s economic growth downwards to 1,4 per cent, which is a stark contrast to the real Growth Domestic Product (GDP) of 2,7 per cent that was projected in the February budget.

This is due to external and domestic constraints, including a slowdown in Europe, China and other emerging economies. Locally, several factors have affected our growth and these include energy constraints, labour disputes, skills shortages and the slow industrialisation of our economy.

As a result of slow growth, we are not raising enough from our tax collection and our revenue is below the projected target.

Minister Nene said the National Treasury will be taking difficult tax decisions to boost revenue.

“Revenue measures will also come into consideration in the period ahead. If we are to avoid reducing expenditure in real terms, about R15 billion a year in additional revenue will need to be raised. Details will be announced in the 2015 budget,” he said.

More funds set aside for social grants

According to the National Treasury documents, government proposes to allocate just under R500 billion to social protection over the next three years.

“Social grants, which are expected to reach 17,3 million people by 2017/18, will account for nearly 85 per cent of this spending.

“The Medium Tern Strategic Framework focuses on enhancing the legislative and policy framework to improve service delivery and access to social assistance.

“The national department will also improve regulation and oversight of the sector.

“Removal of the means test for access to the old-age grant has been deferred and will form part of comprehensive social security reforms,” the National Treasury said.

Details of what this means to the pockets of the beneficiaries is expected to be announced in the main budget in 2015.

Plans to create more jobs, continue allocating free services

The National Treasury Medium Term Budget Policy Statement documents further state that government supports employment growth directly in a variety of ways:

  • By improving the management of the Expanded Public Works Programme, combined with rapid growth in allocations, means that government is on track to achieve its target of 6 million short- to medium-term jobs between 2014 and 2019.
  • Implementing the employment tax incentive, which provides firms with incentives to hire young workers, is already supporting at least 209 000 young workers in about 23 500 firms.
  • The Jobs Fund, which will spend about R3,9 billion over the next three years, will partner with the private sector and non-governmental organisations on projects expected to create more than 167 000 jobs.
  • To create platforms for the growth of export-oriented firms, a number of special economic zones are to be established, complementing existing incentives for industrialisation.

The Minister said on top of these job creation initiatives, government would also continue to supply free basic electricity to vulnerable groups of the society.

“Financial assistance to municipalities for free basic services will continue, ensuring that the poorest households are protected against rising electricity tariffs,” he said.

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