ACDP: Statement by Steve Swart, African Christian Democratic Party spokesperson, on the Medium Term Budget Policy Statement (27/10/2009)

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Published: 27 Oct 2009

ACDP: Statement by Steve Swart, African Christian Democratic Party spokesperson, on the Medium Term Budget Policy Statement (27/10/2009)

"Finance Minister Pravin Gordhan has provided the much needed assurance that government's prudent fiscal policy will not be radically altered, and has implied that it will be driven by the Finance Ministry and National Treasury, presumably with inputs from the Economic Development Ministry. This will calm jittery foreign investors, who require certainty and predictability on economic policy.

The ACDP broadly supports the three - year plan which has had to factor in a massive shortfall in tax revenues. The budget deficit has grown from the 3.8 % of GDP forecasted in February to 7.6% as tax revenue has fallen sharply below the targeted R643bn.

The economy is set to shrink by about 1.9 % this year, before returning to slow growth of 1.5% in 2010. The ACDP welcomes the fact that the Minister has refrained from increasing taxes to fund the deficit, but will resort to borrowing. The sharp increase in government borrowing will regrettably result in increased debt service costs, which could become problematic should the deficit continue over the long term. The deficit is set to drop to around 6.2% of GDP in the next 2010/2011 tax year.

Whilst the South African economy might have reached the bottom of this sharp down-turn, the recovery will no doubt be slow and gradual. The fiscal expansion, and in particular the infrastructure spending has contributed to both long term capacity and short term job creation.

The ACDP supports the additional allocation of R78bn over three years, with the focus on improving education, health services, the fight against crime and job-creation, expanding social services and investing in the infrastructure.

We must ensure that the funds are properly spent and share the Minister's concerns that "the outputs and outcomes are lagging the massive investments we are making". By 2011/12 provincial transfer at R367bn, would have more than doubled the 2005/06 levels. We must ensure that we receive proper value for our money.

We agree with the Minister that over the next few years we will have to do more and better without additional resources. This must serve as a clarion call for more effective service delivery and better performance by government institutions. The challenge will be to curb unnecessary spending and wastage until the economy, and then tax collection, has recovered sufficiently.

The ACDP thus fully supports the Minister's call for less wastage and greater savings by government departments. There is clearly insufficient control over foreign travel, advertising and public relations activities, consultancy services, and luxurious lifestyles. It is disgraceful that public servants and cabinet members, such as the Minister of Police, spent exorbitant amounts on very expensive five-star hotels. We welcome the Task Team's Preliminary Report to effect savings resulting in savings of R14.5bn at national level and R12.5bn at provincial level.

An additional area of concern is the huge amounts transferred to state-owned enterprises (estimated at R200bn for the last financial year), such as Eskom and whether unnecessary expenditure in these transfers can be reduced, resulting in a saving to the state.

The ACDP remains concerned at the rising levels of unemployment, with employment having fallen by 3.5 % since the last quarter of 2008. We fully support the proposed training layoff scheme as an alternative to retrenchments during the recession, as well as the expanded public works programme. Our economic growth path must be more labor absorbing. Reducing unemployment and addressing poverty must remain our single biggest priority.

The ACDP broadly supports the balanced Medium Term Budget Policy Statement presented against a backdrop of shrinking economic growth, a ballooning budget deficit, and mounting pressure on the new government".