Medium Term Budget Policy Statement (Mini-Budget): 23 October 2013

SOUTH AFRICA - In Brief 23 Oct 2013 by Iraj Abedian

---

In his Medium Term Budget Policy Statement, the SA Minister of Finance walked a tight rope, made all the right moves and repeated messages of political support for the National Development Plan.  He was ever-conscious of the importance of macroeconomic stability, given the country’s twin deficits and a “recent sovereign credit downgrade with negative outlook”. He emphasized the importance of resuscitating economic growth, and hence the need for building the much-needed economic infrastructure. He confirmed the National Treasury’s intention to fast track the approval of the controversial youth job subsidy legislation. Facing the prospects of falling fiscal revenues, rising public debt and growing debt service charges, he used the opportunity to introduce a series of belt-tightening measures for government’s ‘consumption expenditure’. These focused on putting stop to the purchase of luxury cars for the Ministers, and the top government executives, the use of expensive hotels and accommodation, and government credit cards. Such wasteful public expenditures have been the subject of much political debate over the past decade in South Africa. The Minister was smart in using the current crisis to tackle them openly, and claim credit for it too! The Minister predicted a GDP growth of 2.1% for 2013 rising to 3.5% in 2016. A technical revision in the measurement of deficit re-measured deficit/GDP ratio from 4.6% to 4.2%! Over the medium term, the Minister anticipates a real increase of 2.2% increase in government expenditure. Contrary to much expectations, and despite the forthcoming national elections of 2014, the Minister successfully resisted the populist approach to fiscal p...