Finance Minister Trevor Manuel wants the level of fixed investment in the economy to rise from its present 16% of gross domestic product (GDP) to 25%, which could assist in halving the unemployment rate by 2015.
Speaking at the release of the 2004-05 Budget, Manuel said the primary concern was to increase the share of savings and investment out of national income to provide the infrastructure and industrial capital formation required for sustained output growth.
The Minister released what could be termed an expansionary Budget , announcing that the deficit would widen this year to 3,1 per cent of GDP.
He stated that, in the longer term, there is a need to seek a better balance between growth in welfare spending and investments in education and infrastructure development. He said this year’s Budget takes several steps in this direction, including the allocations for the expanded public works programme and increased allocations for provincial and municipal infrastructure.
“These are orderly and well-considered shifts, over time, in the structure of our public finances. But they rest on the same fundamental vision and values that underpinned the first Presidential lead projects announced just under 10 years ago,” Manuel states.
In referring to prospects for the local economy, Manuel maintains that, within the context of a strong macroeconomic and fiscal framework, there is a necessity to streamline the operation of the economy, encourage investment, reduce barriers to business development, and to invigorate job creation and labour market processes.
As a result, key economic reforms include improving the efficiency of communication and transport flows, including investment in ports, road, and rail networks.
“In keeping with expansionary fiscal policy introduced in 2001, the period ahead will see strong increases in the social spending and infrastructure investment,” Manuel states.
Looking at some figures, it is clear that all three tiers of government will allocate more funds for the development and maintenance of infrastructure that will benefit local communities, and local and foreign businesses. Expenditure on capital infrastructure is rising as a share of spending, which it is hoped will contributes towards increased access to services, while facilitating economic development.
The medium term expenditure framework (MTEF) seeks to establish a better balance between the expansion of social services and reinforcement of investment in infrastructure and economic development.
Thus, challenges for local government include maintaining and extending infrastructure.
Over the medium term, provinces and municipalities will prioritise labour-based infrastructure projects as part of government’s Expanded Public Works Programme.
Over the next five years, R15-billion will be channelled to this intervention, in part through the provincial infrastructure and municipal infrastructure grants.
Together, these grants receive additional allocations of R3,2-billion over the medium term expenditure framework, which will be partially earmarked for labour-based public works. As regards local government, approximately R1,7-billion of the additional allocation of R3,9-billion for local government goes directly to the Municipal Infrastructure Grant.
This enables municipalities to tackle backlogs in basic municipal infrastructure in a sustainable manner, and promotes the creation of jobs through the Expanded Public Works Program.
The provincial infrastructure grants will increase by R1,5-billion over the next three years and will contribute toward increased spending on labour-intensive projects, such as the building of rural roads, and will lend support to agricultural infrastructure development initiatives.
The aim of this is to help achieve the overall target of creating one-million new jobs. Provincial investment in infrastructure will see provinces budget to make payments of R38,4-billion to capital assets over the MTEF.
Thus, the 2004 MTEF comes closer to streamlining funding through the consolidation of infrastructure grants into the Municipal Infrastructure Grant.
Total grants for infrastructure increase to R5-billion in 2004/5, rising further to R5,6-billion and R6-billion in 2005/6 and 2006/7 respectively. Infrastructure transfers to municipalities increase by 13% a year over the MTEF.
The budget framework also makes provision for a contingency reserve, which allows for unforeseen expenditure in-year and for policy priorities in future years. This means that, if further resources are required for further critical infrastructure projects in support of industrial development, funds will be available from that reserve, should planning and project development proceed more rapidly than anticipated.
Speaking at the release of the 2004-05 Budget, Manuel said the primary concern was to increase the share of savings and investment out of national income to provide the infrastructure and industrial capital formation required for sustained output growth.
The Minister released what could be termed an expansionary Budget , announcing that the deficit would widen this year to 3,1 per cent of GDP.
He stated that, in the longer term, there is a need to seek a better balance between growth in welfare spending and investments in education and infrastructure development. He said this year’s Budget takes several steps in this direction, including the allocations for the expanded public works programme and increased allocations for provincial and municipal infrastructure.
“These are orderly and well-considered shifts, over time, in the structure of our public finances. But they rest on the same fundamental vision and values that underpinned the first Presidential lead projects announced just under 10 years ago,” Manuel states.
In referring to prospects for the local economy, Manuel maintains that, within the context of a strong macroeconomic and fiscal framework, there is a necessity to streamline the operation of the economy, encourage investment, reduce barriers to business development, and to invigorate job creation and labour market processes.
As a result, key economic reforms include improving the efficiency of communication and transport flows, including investment in ports, road, and rail networks.
“In keeping with expansionary fiscal policy introduced in 2001, the period ahead will see strong increases in the social spending and infrastructure investment,” Manuel states.
Looking at some figures, it is clear that all three tiers of government will allocate more funds for the development and maintenance of infrastructure that will benefit local communities, and local and foreign businesses. Expenditure on capital infrastructure is rising as a share of spending, which it is hoped will contributes towards increased access to services, while facilitating economic development.
The medium term expenditure framework (MTEF) seeks to establish a better balance between the expansion of social services and reinforcement of investment in infrastructure and economic development.
Thus, challenges for local government include maintaining and extending infrastructure.
Over the medium term, provinces and municipalities will prioritise labour-based infrastructure projects as part of government’s Expanded Public Works Programme.
Over the next five years, R15-billion will be channelled to this intervention, in part through the provincial infrastructure and municipal infrastructure grants.
Together, these grants receive additional allocations of R3,2-billion over the medium term expenditure framework, which will be partially earmarked for labour-based public works. As regards local government, approximately R1,7-billion of the additional allocation of R3,9-billion for local government goes directly to the Municipal Infrastructure Grant.
This enables municipalities to tackle backlogs in basic municipal infrastructure in a sustainable manner, and promotes the creation of jobs through the Expanded Public Works Program.
The provincial infrastructure grants will increase by R1,5-billion over the next three years and will contribute toward increased spending on labour-intensive projects, such as the building of rural roads, and will lend support to agricultural infrastructure development initiatives.
The aim of this is to help achieve the overall target of creating one-million new jobs. Provincial investment in infrastructure will see provinces budget to make payments of R38,4-billion to capital assets over the MTEF.
Thus, the 2004 MTEF comes closer to streamlining funding through the consolidation of infrastructure grants into the Municipal Infrastructure Grant.
Total grants for infrastructure increase to R5-billion in 2004/5, rising further to R5,6-billion and R6-billion in 2005/6 and 2006/7 respectively. Infrastructure transfers to municipalities increase by 13% a year over the MTEF.
The budget framework also makes provision for a contingency reserve, which allows for unforeseen expenditure in-year and for policy priorities in future years. This means that, if further resources are required for further critical infrastructure projects in support of industrial development, funds will be available from that reserve, should planning and project development proceed more rapidly than anticipated.
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