IJR welcomes a well-balanced budget

Posted on February 24, 2011. Filed under: Economy |

The Institute for Justice and Reconciliation (IJR) commends Finance Minister, Pravin Gordhan, for delivering a balanced budget speech that, against the background of continuing global volatility, should instill much-needed confidence in the economy.

While acknowledging the present global challenges, and how their variability may have an impact on the domestic economy, Gordan indicated that government will forge ahead with its developmental and growth initiatives, without deviating from the principles of prudent countercyclical planning, and with the assurance that it will not incur undue expenditure that coming generations will have to pay for. As such, he has opted for forward-looking consistency, sticking to existing priorities that are meant to change the face of South African society.

“This forward-looking approach has been evident in his emphasis on job creation, particularly so on the creation of employment opportunities for the youth. He repeatedly emphasized the need to create future perspectives for the SA youth,” said Jan Hofmeyr, head of Political Analysis Unit at IJR.

In addition to the R9bn jobs fund and the R20bn in tax incentives to business that President Zuma announced during the State of the Nation, Gordhan also announced that R6bn will be awarded to the National Student Finance Aid Scheme, which will allow more learners from underprivileged background to enter the tertiary education sector.

In line with the New Growth Path document that was released last year, he also committed government to the four priority areas of public infrastructure investment, supporting labour absorbing industries, promoting the green economy, and supporting rural development. In the light of the threat that bad governance practices may have had for the impact of such investment, his commitment to a much harsher approach to fraud and maladministration should be welcomed. In what should be seen as the specific targeting of what has become known as tenderpreneurship, his announcement of the tightening of procurement procedures should be applauded.

Areas that are of concern, which he also highlighted in his speech, has been rising expenditure on the servicing of debt and a doubling of the public service salary bill over the past five years. Although our debt costs remain fairly modest against that of most of our peers, this has been the one item that has shown the most significant growth. Hofmeyr said, given the significant, and unsustainable, rise of public sector salaries over the period mentioned, much bargaining will be needed between the state and public service unions in order to ensure that government employees are being compensated at competitive rates, without jeopardizing the prospects for increased development expenditure.

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