SA waits for Manuel's Budget Speech

Wednesday, February 11, 2009

Pretoria - With the world economy in trouble and the Rand suffering some of its biggest loses in recent years, South Africans will be waiting anxiously Wednesday to see what the 2009 Budget Speech holds.

Finance Minister Trevor Manuel will be under pressure today when he delivers his Budget Speech to provide funding for the promises made by President Kgalema Motlanthe in his State of the Nation Address on Friday.

Mr Motlanthe said government would "find creative ways to raise funds" for its R690 billion programme to beef up public infrastructure.

He also emphasised the need for job creation and service delivery including longer holidays and extended training.

It is in this context that this week's Budget will flesh out some of these proposals, ranging from significant and continued infrastructure spending to "job-sharing" and leveraging pension funds for economic development.

Minister Manuel will deliver his 13th budget speech and by all indication it will be one of his most challenging yet. Last year, Minister Manuel warned of storm clouds gathering above the world economy but promised South Africa would weather the storm.

Now with the current economic slowdown increasingly putting a strain on government revenue, the challenges increase as more companies run into trouble and more people lose their jobs.

Economists predict that instead of tax cuts, Minister Manuel is expected to announce a budget deficit of around 2 percent of Gross Domestic Product. This means government will have to borrow more than R40 billion to finance its spending priorities.

Minister Manuel has long defended South Africa's Manuel economic policies against calls for greater social spending and argues that the conservative policies have so far shielded the country from the worst of the global crisis.

But in October last year he announced South Africa's first budget deficit since 2005, as exports slowed and commodity prices dropped.

Four months ago, Minister Manuel warned that growth in 2009 would slow to 3.0 percent, after four years of expansion at 5.0 percent a year, but economists say that estimate will have to be revised down again.