Gordhan talks of transformation

Gordhan talks of transformation

The National Development Plan featured prominently in the 2014 Budget, with the government focused on accelerating growth, creating work and building a more equal society. But economic growth of 5% a year or more was imperative….

The National Development Plan featured prominently in the 2014 Budget, with the government focused on accelerating growth, creating work and building a more equal society. But economic growth of 5% a year or more was imperative, and the Budget included initiatives to achieve this.

The national Budget sets out the resource framework for the implementation of the National Development Plan (NDP), which builds on the premise that all South Africans will gain from the government’s efforts to transform the economy and create an equal society.

Presenting his Budget in Parliament in Cape Town on Wednesday, 26 February, Minister of Finance Pravin Gordhan said the government’s plans for the year ahead were “focused on the transformation imperatives that will accelerate growth, create work opportunities and build a more equal society”.

“This Budget lays the foundation for the structural reforms envisaged over the next term of this government. It sets out the resource plan for an intensified implementation of our National Development Plan. It is tabled in the knowledge that all South Africans will gain from our economic transformation.”

Gordhan said the NDP, “which draws on expertise and advice from South Africans of all walks of life”, reflected the priorities underpinning the 2014 Budget, and formed the basis for the next phase of economic and social transformation. To achieve this economic transformation, the government would have to work together with big businesses – a theme central to the NDP – to “radically change” the economy, reduce poverty and inequality, and raise employment and investment.

“It means working with black entrepreneurs to grow their companies across South Africa and beyond, working with small and large businesses to build value chain linkages that support dynamic export oriented, competitive enterprises. It means bringing those who are marginalised into the mainstream of opportunity and activity. It means a better standard of living for all.”

Any attempts to create jobs and reduce poverty would have to be met by a corresponding economic growth of 5% a year or more. To achieve this, the government was implementing a wide range of initiatives, including accelerated public infrastructure investment; support for special economic zones and manufacturing incentives in the Industrial Policy Action Plan; and a tax incentive to encourage youth employment.

Infrastructure spend

The state had spent R1-trillion on infrastructure over the past five years and would be spending R847-billion over the next three years, according to Gordhan. “Spending on industrial incentives amounted to R22-billion over the past five years. R21.8-billion is budgeted for the MTEF [Medium Term Expenditure Framework] period ahead. 128 projects have been approved under the Automotive Investment Scheme, and more than 460 companies have benefited from the Clothing and Textiles Competitiveness Programme.”

Some of the infrastructure projects undertaken include:

  • Medupi power station, which is expected to be completed towards the end of this year;
  • Transnet, which has increased capacity on its coal line and plans are in place to expand it further, as well as the iron ore and manganese lines;
  • The Passenger Rail Agency of South Africa, which has refurbished 500 Metrorail coaches in 2013, and its new rolling stock procurement programme will get under way this year;
  • Spending on social infrastructure, which includes health, education and community facilities, will increase from R30-billion in 2012/13 to R43-billion in 2016/17, and priority will be given to programmes to eradicate school infrastructure backlogs and to refurbish clinics and hospitals; and,
  • Infrastructure grants, of which a total of R40-billion will be transferred to local governments for their water, sanitation, energy and environmental functions in 2014/15.

In line with the NDP’s objectives, the private sector is increasingly investing in infrastructure development. “Contracts for 47 renewable energy projects were concluded in 2012 and 2013, many of which are already under construction. These will add 2 460MW of power capacity, and investment of R70-billion. A further R45-billion in investment will be contracted this year,” said Gordhan.

Tax measures

Over the medium term, several spending plans and tax measures aimed at addressing structural economic challenges and promoting stronger, more inclusive economic growth as envisaged in the NDP, would implemented. These included:

  • Manufacturing development incentives would be allocated R10.3-billion over the next three years, in addition to tax relief offered through incentive programmes;
  • Economic competitiveness and support programmes would provide R15.2-billion to businesses to upgrade machinery and increase productivity over the MTEF period; and,
  • Special economic zones would be set up through an allocation of R3.6-billion to promote value-added exports and generate jobs in economically disadvantaged parts of the country.

Small businesses played a crucial part in employment creation, the minister pointed out. Unfortunately, many small businesses faced challenges and, as a mitigating factor, the government was allocating R6.5-billion to support small and medium enterprises over the next three years. In addition, to ease the burden on small businesses, the turnover tax regime would be amended to further reduce the tax burden on micro-enterprises.

Employment

On employment, Gordhan said that since the 2009 global recession, employment had increased by approximately 1.3 million, as recorded in the Quarterly Labour Force Survey. But unemployment of 24% of the work force, he added, was still far too high. The government had a strategy in place that included the youth employment tax incentive. In its first month, it had recorded 56 000 beneficiaries.

Increased investment in the economy by the private and the public sectors was at the heart of creating jobs and growth. He said the Department of Trade and Industry, led by Minister Rob Davies, was completing a holistic framework for investment, a move that would provide “policy certainty” for domestic and foreign investors.

“This framework flows from the National Development Plan, which places investment at the centre of our economic growth plan. We have a number of incentives in place, which have provided substantial benefits to both foreign and domestic investors. Moreover, under the guidance of Minister Davies, a new Promotion and Protection of Investment Bill has been released for public comment. This entrenches the rights of all investors, ensuring that property rights are protected, in line with the Constitution.”

Much had been done to transform the lives of South Africans since 1994, Gordhan said. The average income of South Africans had increased by over 30%, and would continue to rise in the years ahead. More than 5.9 million jobs had been created since 1996 and black participation in the economy had expanded.

“These are considerable achievements. But they are not enough. There are still fault lines that run deep in the social fabric of our communities and tendencies in the political landscape.” Black economic participation remained incomplete, and the state and the private sector should give more support to enterprises and entrepreneurs.

“The National Development Plan lays the foundation for fundamental transformation. It is a platform on which we need to mobilise our youth, and bring together all South African citizens,” said Gordhan.



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