Budgets, even good ones, merely allocate resources

August 2014

    Solutions lie outside of the fiscal tool and key is in implementation

    This year’s budget, the last of the current sitting administration and possibly the last budget of finance minister Pravin Gordhan, was a mix of conservatism as well as practicality given that we are in an election year.

    While it did bring about an income tax relief of R9.3 billion to households, increased tax cuts and support to SME’s, incentives and funding for Special Economic Zones (SEZ), and continued funds for infrastructure development as well as to social services, it was somewhat conservative in its approach to the challenges South Africa faces in reducing the current 24% unemployment rate.

    While the National Development Plan (NDP) is aimed at creating an equal society where all can partake of the economy the latest budget fell somewhat short in terms of reaching these objectives.

    With an estimated economic growth rate of 2.7% predicted for 2014 we are still far off the 5% growth per annum needed as outlined in the National Development Plan (NDP) to make an impact on structural unemployment.

    While many quarters of society, most notably labour, have not given their full support to the NDP, its implementation remains critical in order to get SA on the right economic path. While this budget did not allocate specific amounts to the NDP, key sectors outlined in the plan have been allocated their share of resources.

    Infrastructure spending over the past five years has amounted to R1 trillion with R847 billion allocated over the next three years for numerous projects including rehabilitation of dams, refurbishing of Metrorail coaches as well as support for IPAP &SEZ.

    Education remains the key pillar for NDP to be successfully implemented. As such it receives an allocation of R256 billion. Another key sector for the successful implementation of NDP is that of healthcare.

    With the NHI pilot programmes already underway and R1.2 billion allocated to piloting general practitioners code, the sector still faces numerous challenges which no amount of budget allocations can resolve unless structural reforms are initiated.

    Employment remains but the biggest obstacle currently facing the country. While strides have been made in creating employment for all, the negative theme far outweighs any good news on the topic. Allocations to employment include the expansion of the Public Works programme as well as the introduction of the youth wage subsidy, both of which needs some time in order to judge it a success or not.