The Finance Minister of the Republic of South Africa, Mr Nhlanhla Nene, released his medium term budget policy statement in parliament, Cape Town on Wednesday. It was a mixed statement that the minister presented with the majority of pointers pre-empting a not-so-good near future for the Rainbow Nation. There were, however, a few key pointers that showed a positive growth and consequently a hope for the country.
The minister reported that the budget defective was now pegged at 4.1% of the Gross Domestic Product (GDP), showing a marginal increase from the 4.0% of the one for the year 2013/14. Mr Nene anticipated this important pointer to narrow extensively to 2.5% by the time we get to the financial year 2017/18.
Moving on to the growth of the economy, the minister said the country had seen a growth of 1.4% in the year 2014, showing a cut from the 1.9% that was experienced in 2013. Minister Nene anticipated that the economic growth would see an increase of just over a single percentage point to 2.5% next year and a further increase to take it to the 3% mark in 2017.
Nene, who took over from Pravin Gordam after the May elections, said that he expected inflation to average 6.3% in 2014, ease to 5.9% in 2015 and finally to reduce much further to 5.4% in 2017. Commenting on the effect of the rand exchange rate, the minister said that if there was a more competitive rand exchange rate which was sustained in real terms and not eroded by wage settlements that overshadow production, this would help exports, which would in turn help reduce inflation. To help achieve this, Nene advised that this state of affairs could be achieved if the government’s foreign borrowing program could remain focused on financing foreign-currency commitments arising from interest payments, and repaying maturing loans.
Turning to government revenue and its spending, the minister reported an increase in the revenue collected by government to R1.1 trillion (29.5 percent of the GDP), up from the R1.01 trillion or 29.4 percent of the GDP in 2013/14. From an initial spending of R1.15 trillion in 2013/14 to R1.25 trillion in 2014/15, he anticipated an increase to R1. 44 trillion the next three years.