With tax revenues for the current financial year expected to be more than R70-billion down on the February forecast, Finance Minister Pravin Gordhan on Tuesday eased exchange controls in an effort to stimulate investment in South Africa's flagging economy.

In his Medium-Term Budget Policy Statement (MTBPS), tabled in Parliament, he also says creating jobs and safeguarding social security are among government's key spending priorities over the next three years.

According to the MTBPS, the decline in tax revenues is mainly due to lower-than-expected corporate and value added tax (VAT) returns. "As the economy has slowed, tax revenues have declined and it is expected that total tax revenue for 2009/10 will be R70,3-billion below the forecast presented in the 2009 Budget."

The MTBPS says tax revenue is expected to recover over the medium term as the economy picks up.

"Tax revenue is expected to reach 26,2 percent of GDP by 2012/13, driven by a recovery in household consumption and corporate profits, and supported by measures to broaden the tax base."

According to the document, gross tax revenue for the current financial year will be R589-billion.

A range of exchange controls are to be lifted in a move aimed at reducing red tape and the cost of doing business in South Africa. Among reforms announced, is a big jump in the amount companies are allowed to invest overseas, with the R50-million limit for company applications to "undertake outward investment" raised to R500-million.

Other regulations to be lifted include the 180-day rule requiring companies to convert their foreign exchange into rands; and, doing away with the R250 000 limit on advance payments for imports.

Foreign capital allowances for individuals will also be increased. "The foreign capital allowance for resident individuals, last adjusted in 2006, has been increased from R2-million to R4-million, and the single discretionary allowance from R500,000 to R750,000."

The discretionary allowance includes gifts, donations and travel allowances.

On job creation the document says consideration is being given to establishing a fund to support business, aimed at increasing employment.

The fund will be made up largely of existing spending programmes and tax breaks, with clear, measurable job-creation targets.

Policy options to boost employment include expanding labour-intensive services, focusing industrial incentives on labour-intensive industries, using the tax system to encourage employment, introducing a targeted voucher to help matriculants enter the workforce, and implementing a coherent rural development programme.

The document shows that government spending will increase from its current R841,4-billion to R1,052-trillion in 2012, with education, health and social services the priority areas.

"Major trends (in spending) include a rising share of spending allocated to education and health and... strong growth in spending on capital programmes." Spending on education will rise by 8,6 percent from its current R144-billion to R184,6-billion in 2012.

Investment in social protection will rise by 8,9 percent from R121,1-billion to R156,6-billion in 2012, and health spending by 8,6 percent from the current R89,8-billion to R115,2-billion as increasing numbers receive antiretroviral treatment for Aids.

"The fight against HIV and Aids is a key priority and treatment uptake will soon exceed more than 300 000 new entrants per year.

"By the end of March 2010, more than 900 000 people will be receiving ARV treatment and an estimated 80 percent of new Aids cases will be entering treatment by 2011/12."

The largest percentage increase in spending in the coming three years will be on housing and community amenities, with investment to rise by 12,3 percent from R69,4-billion in 2009, to R98,5 in 2012.

The goal of "eradicating informal settlements" will continue to receive priority.

Investment in safety will increase by 9,3 percent in the coming three years, from R77,7-billion to R101,6-billion.

An extra 22 447 police personnel will be recruited by 2012, raising the size of the police force to 207 760.

The primary aim will be to strengthen the detective services and crime intelligence.

Government also plans to save R27-billion over the next three years by cutting wasteful spending.

A preliminary report of the ministerial task team, established earlier this year to scrutinise state spending, says belt tightening could see both national and provincial government saving R14,5-billion and R12,6-billion respectively by the 2012/13 financial year.

The report says big savings can be had simply by changing the "spending habits" of government departments and cutting out "non-core items and frills". It offers as an example the R97-billion spent last year by national and provincial departments on procurement and travel.