Tough balancing act for Minister Gordhan

Wednesday, February 22, 2017

Pretoria - Finance Minister Pravin Gordhan will today deliver the 2017 Budget amid slow growth and high unemployment.

But, he is expected to tell South Africans that the economy remains strong and resilient enough to overcome the current economic challenges.

Government anticipates an economic growth rate of 1.3% in 2017 following an estimated 0.5% in 2016. Buoyed by the fact that South Africa successfully avoided credit ratings downgrades, which would have had significant impact on the country’s economy, Minister Gordhan will be in a much better space to outline measures to spur economic growth and to raise the additional R30 billion he said South Africa needs over the next two years.

More significantly, the budget is delivered in just over a week after President Jacob Zuma announced a radical socio-economic transformation in the State of the Nation Address on 11 February. President Zuma said the radical shift meant that there was a need for fundamental change in the structure, systems, institutions and patterns of ownership, management and control of the economy in favour of all South Africans, especially the poor and the majority.

It is expected that the budget may articulate practical ways of achieving economic transformation, while achieving fast growth at the same time. Economists have said that slow economic growth will make it hard for government to achieve the redistribution President Zuma alluded to in the State of the Nation Address.

Last year, Treasury said it expected the budget deficit to fall from 3.2% in 2016/17 to 2.4% in 2018/19 (3.9% in 2015/16). Government would lower the expenditure ceiling by R10 billion in 2017/18 and R15 billion in 2018/19 by reducing public sector compensation budgets. An additional R18.1 billion of tax revenue was to be raised in 2016/17.

In last year’s budget, the Minister further said Treasury projected that debt stock as percentage of GDP would stabilise at 46.2% in 2017/18.  

Education and health priorities

Education has over the years claimed the biggest slice of the country’s budget and this year is expected to be no different.

The budget for higher education is expected to shoot up following a decision by government to fund fee increases for students from low income homes. More funding allocations are also expected for the National Student Financial Aid Scheme.

In health, the budget allocation will keep in mind the phasing in of the National Health Insurance scheme, which government wants to roll out over a period of 14 years.

What the Minister said in 2016

Last year, Minister Gordhan said from 2016 to 2018, government would spend:

  • R457.5 billion on social grants.
  • R93.1 billion on transfers to universities, while the National Student Financial Aid Scheme would receive R41.2 billion.
  • R707.4 billion on basic education, including R45.9 billion for subsidies to schools, R38.3 billion for infrastructure, and R14.9 billion for learner and teacher support materials.
  • R108.3 billion for public housing.
  • R102 billion on water resources and bulk infrastructure.
  • R171.3 billion on transfers of the local government equitable share to support the expansion of access of poor households to free basic services.
  • R30.3 billion to strengthen and improve the national non-toll road network.
  • R13.5 billion to Metrorail and Shosholoza Meyl to subsidise passenger trips and long-distance passengers.
  • R10.2 billion for manufacturing development incentives.
  • R4.5 billion for NHI pilot districts.

Today Minister Gordhan might announce a review in these figures in line with changing environment and government priorities.

The Budget Speech will be delivered in Parliament at 2pm. –

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