Introduction
The first democratic elections in April 1994 heralded the birth of a new nation. It was born out of decades of struggle for the right to build a better life for all.
Our democracy is based on a progressive and widely accepted Constitution, which is underpinned by the Reconstruction and Development Programme (RDP). The RDP is government's strategy for rebuilding and restructuring the economy to create a better life for all. The RDP aims to meet basic needs, and eliminate poverty, to create jobs, develop our human resources and strengthen the democratic institutions of our civil society.
But the economy must grow if we want to achieve the aims of the RDP. So government has developed the Growth, Employment and Redistribution (GEAR), which is a strategy for growth and job creation.
GEAR is a plan that shows what policies government should implement if the economy is to grow to 6 percent and create 400 000 new jobs by the year 2000. GEAR shows that to create jobs we need investment, and that both government and the private sector are important for this to happen.
The Role of the Budget
The budget reflects the choices that government has to make, and is the tool it uses to achieve its economic and developmental goals. The government has to balance a wide range of legitimate demands with limited resources at its disposal.
In the budget government sets out what it is going to spend (expenditure) and the income it collects through taxes (revenue), which it needs to finance expenditure. However, government spends more than it collects, and needs to borrow money (debt) to cover the shortfall. Government pays interest on all money it borrows.
After education, the interest government pays on its debt is the largest item on the budget. The more we borrow, the more interest we have to pay. If we do not pay interest, we will not find anyone willing to lend us the money we need.
The budget affects how government allocates resources, and also influences income distribution, prices, employment and economic growth. If the budget is used well, it can be a powerful tool for social and economic transformation. However, if it is used recklessly, the budget can cause harm to the eonomy and destroy transformation.
The 1997/98 Budget and the Constitution
The Constitution sets out the division of functions and responsibilities between the different spheres of government - national, provincial and local. Some of these functions (for example defence) are the responsibility of national government, whereas other functions (for example ambulance services) are the function of provincial government, and other functions (such as agriculture) are shared.
Provinces and local governments are entitled to an equitable share of the revenue collected nationally, to provide for basic services and the functions for which they have responsibility.
The 1997/98 budget is the first step in implementing the system of intergovernmental finances set out in the Constitution.
The 1997/98 budget allocates an amount to each province, which then draws up its own budget. This is a first step in devolving important planning and budgeting responsibilities to the provinces for them to provide crucial public services.
The 1997/98 budget - creating a better life for all
Government is committed to put people first and create a vibrant growing economy which contributes to the aims of the RDP by:
Investing in poverty relief. Government will fund community-based poverty relief programmes and increase social pensions.
Investing in social development. Government will spend more on education, health, welfare, housing, water and sanitation, and less on defence.
Investing in a safer society. Government will fund the national Crime Prevention Strategy, increase the budgets of the police, justice and correctional services departments, and support the Business Against Crime project.
Providing tax relief to low and middle income earners. All taxpayers will pay less tax. People who earn less than R60 000 will proportionately benefit more.
Relaxing exchange controls. Government will take significant steps to relax exchange controls so that South Africans can do business more freely with the rest of the world.
Improving the health of government finances. Government will keep the difference between what it spends and what it collects (the deficit) to 4% of GDP, which is the value of the goods and services produced by the economy (Gross Domestic Product ).
Focusing on tax morality. To overcome the culture of non-payment and tax evasion, only those people whose tax affairs are in order will be able to do business with government, or benefit from the relaxation of exchange control.