Hon Speaker, Mr President, Mr Deputy President, fellow Cabinet colleagues and Deputy Ministers, the Governor and Deputy Governors of the Reserve Bank, the MECs of Finance, fellow South Africans, hon members, I have the honour to present today the fourth Budget of President Zuma's administration. Mr President, you said in the state of the nation address that, and I quote:
We should put South Africa first. All of us have a patriotic duty and responsibility to build and promote our country.
You further said:
The National Development Plan provides a perfect vehicle for united action precisely because it has the support of South Africans across the political and cultural spectrum. Leaders in every avenue should be ready to rise above sectional interests and with great maturity, pull together to take this country forward.
This challenge applies, as you have pointed out, Mr President, to all sections of our society - business, labour, public representatives, activists and citizens, more importantly, in every part of the country.
As we pointed out in the 2012 Budget, global economic certainty will remain with us for some time to come. It is certainly with us as you have seen from the recent ratings decisions around the world.
South Africa's economic outlook is improving, however, requires that we actively pursue a different trajectory if we are to address the challenges ahead. Under your leadership, Mr President, we have opened new channels of communication and have built more cohesion among key stakeholders in South Africa. We have taken many steps to create the conditions for higher levels of confidence in our economy and the society. Now, as you have pointed out, we are ready to implement the National Development Plan, the NDP, and other programmes of government.
South Africans have a rich history of acting together for a better future. Thirty years ago - some of us had a bit more hair, ladies and gentlemen, than we have now - the United Democratic Front brought together people of goodwill and foresight from all corners of the country. Many points of view and differences in approach were marshalled around a single cause, building a united and nonracial society. We did the same for the first democratic elections in 1994, which laid the basis for an enduring democracy.
The Reconstruction and Development Programme, the RDP, is the foundation on which we build. It provides, and I quote:
It is this collective heritage of struggle, these common yearnings, which are our greatest strength. At the same time the challenges facing South Africa are enormous. Only a comprehensive approach to harnessing the resources of our country can reverse the crisis created by apartheid. Only an all-round effort to harness the life experience, skills, energies and aspirations of the people can lay the basis for a new South Africa. The schools, clinics, taps and houses we have built and put in place since then are testimony to the truths of these assertions. The freedom and democracy we cherish, and the knowledge that these are permanent, inalienable rights that are grounded in our basic law - the Constitution - are the foundation on which all South Africans can make a contribution.
Looking back on the path we have travelled since 1994, we see the importance of a long-term perspective on development and change. It is people acting together for a common vision that connects the past to the present and makes a better future possible.
The challenge for us, hon members and indeed all of us in South Africa, is that people are asking the following: if we can sustain our miracle; whether, as a nation, we have the ability, the will and the wisdom to take another leap forward in reconstructing and developing South Africa, and whether South Africans can still show the world how to overcome intractable problems that face the community of nations. In these trying times, South Africans too ask the question: Can we be a winning nation?. The answer surely must be: Of course we can.
As Benedict Mongalo, a young man from Johannesburg - one of the tipsters - wrote in his tip, and I quote:
We all acknowledge that unemployment, poverty and inequality are the greatest challenges facing our country. We will not eradicate this problem overnight. This is like manually moving a mountain and the only way to do it is to move one rock aside and the next generation, or the next government, will do the same until this mountain is moved.
These are wise words from a young man. [Applause.]
Hope and confidence come from an energetic involvement and a willingness to make a direct contribution to change. The imperatives of change are not just challenges to government, they confront all of society. A new framework for development is an opportunity to unite around an inclusive vision, and join hands in constructing a shared future.
The National Planning Commission, the NPC, has cautioned that our development objectives will take time and hard work to achieve. Measured year by year, district by district, there will be advances and, indeed, there will be setbacks. However, in each five-year term of government we must demonstrate, as we had since 1994, that we can meet more demanding milestones - more jobs, enterprises and technological innovation, better housing, and progress in education and health.
Working together, we all know that we can do better. All of us - citizens, taxpayers, public servants, teachers, activists, managers and workers - have a shared future and a shared plan to make it work.
The 2013 Budget is presented during challenging times, but against the background of a new strategic framework for growth and development. This is a Budget in which there is limited room for expansion, yet there are significant opportunities for change.
There are, firstly, signs of improvement in the world economy, though the outlook remains troubled, and it is more than likely that it will remain troubled for the next three to five years, if not beyond that.
South Africa's economy has continued to grow, yet at a slower rate than projected at the time of the 2012 Budget. The 2013 Budget takes the National Development Plan and other programmes of government as its starting point or point of departure. The strategic plans of government and the medium-term expenditure plans will be aligned to realise our objectives.
Government has taken measures to control growth in spending. Spending plans have been reduced by some R10,4 billion through reprioritisation, savings and a draw-down on the contingency reserve. Government remains committed to a large-scale infrastructure investment programme and our path of spending and the recovery in revenue will stabilise debt at just higher than 40% of the Gross Domestic Product, the GDP. The budget deficit will fall from 5,2% in 2012-13 to 3,1% in 2015-16.
This year, a review of our tax policy framework and its role in supporting the objectives of inclusive growth, employment, development and fiscal sustainability will be initiated.
In the 2013-14 fiscal year, personal income tax relief of some R7 billion is granted.
A new local government equitable share formula is proposed, providing a subsidy for free basic services designed to reach 59% of households in South Africa. [Applause.]
Further, education and training, Minister Nzimande, will continue to be extended and enhanced.
In this Budget, we continue to invest in education, health, housing, public transport and social development - components of the social wage, which add up to about 60% of public expenditure.
As part of a package of measures aimed at boosting opportunities for young work seekers, government recognises the need to share the costs of expanding job opportunities with the private sector. Following careful consideration of inputs from various stakeholders, a revised youth employment incentive will be tabled in the House after consultation with various stakeholders together with their proposed employment incentive for the special economic zones. In this regard, I want to quote from page 23 of the Budget Review:
Government's existing approach to supporting employment growth focuses on training, skills development, labour market activation and short-term public employment. Programmes in support of these objectives include the Sector Education and Training Authorities, Setas, the further education and training, FET, colleges small enterprise support, the Industrial Policy Action Plan, Ipap, the Expanded Public Works Programme, EPWP, and the Community Work Programme, CWP.
To complement the existing programmes, a tax incentive aimed at encouraging firms to employ young work seekers will be tabled for consideration by Parliament. The introduction of this tax incentive, which takes into account the concerns of organised labour, will help the young people enter the labour market, gain valuable experience and access career opportunities.
The administratively simple incentive will create a graduated tax incentive of an entry level wage falling to zero when the earnings have reached the personal income tax threshold. Protection provided by the existing the labour legislation combined with oversight by the SA Revenue Service, Sars, and the Department of Labour will limit any displacement that might arise. A similar tax incentive will be made available to eligible workers of all ages within the special economic zones. [Applause.]
Let us for a moment reflect on the global situation. There are signs of improvement in the world economy, though the outlook remains troubled, as I pointed out earlier. Growth is still muted in the United States and Japan, and much of Europe is in recession. Policy interventions by the major central banks were needed during 2012 to avert new economic and fiscal crises. Yet many advanced economies contracted and reduced growth during the fourth quarter of 2012, and global prospects are expected to improve only marginally from a growth of 3,2% in 2012 to 3,5% in 2013.
Emerging markets, particularly China and India, continue to lead global growth, although at lower rates than before.
High levels of debt are inhibiting progress in many countries, particularly in the developed world. Yet measures to reduce indebtedness have the effect of holding back growth. Unemployment remains high in many countries - developed and developing - yet technological progress continues to reduce the demand for labour in many industries. Inequality is fuelling discontent around the world.
So there are parallels between the global economic discourse, on the one hand, and our own policy challenges in seeking a pragmatic balance between recovery and consolidation, between economic power and social solidarity, between infrastructure investment and human development, and between encouraging enterprise and regulating markets on the other hand. And we are grappling with these issues that confront many other nations today.
As far as the South African economy is concerned, our economy has continued to grow, but at a slower rate - as I have pointed out earlier - projected at the time of the 2012 Budget as a GDP growth of 2,5% in 2012, and is expected to grow at 2,7% in 2013 and 3,8% in 2015. So in that sense we are fairly good. But these are just forecasts; they can be right, there can be more optimism around them, or there could be more pessimism depending on how the rest of the year develops.
Inflation has remained moderate, with consumer prices having risen by 5,7% in 2012, and projected to increase by an average of 5,5% per year over the period ahead. Our trade performance lives to be better. Exports grew by just 1,1% in real terms last year, while imports increased by 7,2%. The deficit on the current account of the balance of payments was 6,1% of the GDP. This means, in simple terms, that expenditure in the South African economy exceeded the value of production and income in the South African economy by R190 billion last year. So that is the gap we have in our economy. That is the gap that needs to be filled in by the people investing in this country either in shares, in bonds or in the real economy itself. This is partly a consequence of the disruption of the mining sector activity and the structural reduction in mineral exports due to a lower demand elsewhere in the world.
Some of the foundations of faster growth are indeed in place. Strong capital investment by the public sector, the addition of electricity- generating capacity, relatively stable inflation and low interest rates will support improved growth rates over the mediumterm.
However, this is not enough. Much more is needed. In particular a significant increase in private sector investment and competitiveness is needed in the wider economy - in agriculture, manufacturing, tourism and communications. Every sector has to play its part in expanding trade, investment and job creation.
The National Development Plan, supported by the New Growth Path, the GDP, and other programmes, invites us to look beyond the constraints of the present to the transformation imperatives of the next 20 or 30 years. These imperatives are already apparent in the realities of the social and economic restructuring that is under way.
The first reality is our demographic transition. A million young people leave school every year, and we need a package of reforms and measures that will improve education, training and work opportunities for young people.
The second reality is that we are a rapidly urbanising society. This means that we need to meet urgent demands for housing, municipal services, schools, clinics, public transport and commercial development. But it also means that we have an opportunity to build an integrated urban landscape, with effective partnerships between municipalities, local businesses and civic associations.
The third reality is economic competitiveness. We need to invest in infrastructure, raise productivity and diversify our economy, to create jobs and raise living standards.
Improving the quality of education and training is an essential foundation of a more productive and inclusive growth path.
Stronger links with Africa and other emerging economies are needed. We have to adapt to a low-carbon economy, including the mobilisation of our renewable energy potential.
Finally, there is the social solidarity challenge that cuts across all of these, which is to build a more equal and inclusive economy that bridges our racial and other divides.
These are the themes on which the NDP provides clear guidance, not just about strategic goals and objectives, but also about the practical difficulties and choices we are facing.
There are substantial strengths on which to build a well established legal system, secure property rights, an effective tax system, world-class higher education institutions and science councils, established energy, transport, water, communications and infrastructure networks, all of which will improve with the programmes of the Presidential Infrastructure Co- ordinating Commission, the PICC, that are coming into place.
We have expertise and capacity in many areas in South Africa - mining, construction, retail, finance, logistics and manufactured exports, and a sound macroeconomic and fiscal framework to support all of these. So those are the strengths we have. We must not feel that because we have challenges we do not have strengths in our economy and in our people that we can build upon.
The NDP emphasises key institutional capabilities that we either need to create or should have: the need to professionalise the Public Service and strengthen accountability; improved management and enforcement systems to fight corruption more aggressively; the reinforcement of the education accountability chain, with lines of responsibility from the state to the classroom - so we wish Minister Motshekga success in monitoring the attendance of teachers at schools ... [Applause.] ... and improved planning and management of strategic infrastructure projects, which the government is executing through the PICC. The NDP also highlights the need to lower the cost of living for households, and to reduce the cost of doing business for small and emerging enterprises.
Let me also reiterate the NDP's emphasis on uniting South Africans around a common vision. It proposes a social compact to reduce poverty and inequality, and raise employment and investment, recognising that progress towards a more equal society requires shared efforts across the public and private sectors, and by all South Africans.
So the 2013 Budget takes the NDP as its point of departure and recognises that our medium-term plans, as the President has pointed out, are framed in the context of a longer-term vision and strategy; focuses on strengthening growth and the creation of employment; prioritises improvements in education and the expansion of training opportunities; and promotes progress towards a more equal society and an inclusive growth path.
National development must also be coupled with fiscal sustainability, which ensures that the progress we make will not be interrupted or reversed. The government relies on resources derived from the wider economy, and the best way to generate resources or tax revenues is to grow the economy faster and increase the tax base. This means that all of us must pay a little bit more tax. [Applause.] Thank you very much. [Interjections.] I am coming to that in a moment. [Interjections.]