Minister of Finance Nhlanhla Nene Medium Term Budget Policy Statement

Oscar Thomas
22 October 2014

Minister of Finance Nhlanhla Nene today delivered the Medium Term Budget Policy Statement in Parliament.

Minister Nene said over the past decade, government spending has doubled in real terms, funding a large expansion of the social wage and capital budgets.

Nene said social assistance pays an income directly to vulnerable households, while the other public services that make up the social wage replace or subsidise day to day expenses such as housing, education and amenities, therefore reducing the cost of living for households.

He added that social grants are expected to reach 17.3 million people by 2017/2018 and will account for nearly 85% of this spending.

Basic Education exceeds R640 billion, accounting for nearly 15% of all spending.  In the statement he said allocations proposed over the MTEF period for school infrastructure will ensure that gazetted norms and standards are met by 2016.

The budget for the cluster of defence, public order and safety accounts for 13% of total spending and will grow at an annual average of 5.6%, reaching over R190 billion in 2017/2018.

Employment growth has decreased however employment programmes have grown by 10% a year over the spending period ahead.

In terms of health almost R500 billion which is nearly 11% of total spending will be allocated to health in order to assist and achieve a long and healthy life for all South Africans.

Nene said we face a difficult economic environment where economic growth of recent years that is driven by consumption and debt has reached its limits. Nene said the risks that we highlighted in February this year when we tabled the 2014 Budget related to protracted labour strikes and electricity shortages have been realised.

Nene said the weak economic performance has put a great deal of pressure on the fiscus, with revenue insufficient to cover expenditure. Nene said the budget deficit is high, debt levels have approached the limits of sustainability and the economy is vulnerable to global volatility, especially in the face of monetary policy normalization in advanced economies. Nene said we have reached a turning point as fiscal consolidation can no longer be postponed.

Nene said we expect the rate of economic growth to improve over the next several years. Nene said the improved outlook is supported b investments currently underway in energy and transport, a gradual pick up in global growth, rising exports to the rest of the African continent and a recovery in private investment. Also, contained in the medium term strategic framework are specific growth programmes which will be reflected in the programmes of departments.

Nene said the fiscal proposal announced today combined with various micro-economic interventions are necessary to sustain social progress and to move the economy onto a new and more sustainable development path.

"Faster economic growth that is sustained over a long period is not just a key objective of the National Development Plan but a necessary condition to raise the resources we need to fund the country’s social and economic transformation Nene added.