Government was “very serious” about job creation and had set aside about R150bn for both this and the related skills development over the next three years, Minister of Finance Pravin Gordhan said on Wednesday when tabling a slightly expansionary budget which sees a slower than projected reduction in the budget deficit going forward.
The focus was necessary to address SA’s “chronic employment crisis”.
Among the job creation measures announced were a R5bn youth employment subsidy over three years which will be introduced despite strong resistance from the labour movement.
It is due to be tabled before the National Economic Development and Labour Council on Friday.
The minister also extended R8,1bn in tax relief to individuals to account for fiscal drag as well as allocating substantial amounts of the R979,3bn consolidated budget for education and skills development.
The youth employment subsidy will take the form of a tax credit administered by the South African Revenue Service through the PAYE system. It would lower the relative cost of labour for business without affecting a worker’s wage.
The subsidy will operate alongside the R9bn jobs fund announced by President Jacob Zuma in his state of the nation address.
To equip young people for the jobs market further education and training colleges will get R14bn over the next three years, over R20bn will be ploughed into the sector education and training authorities and R5bn into the national skills fund.
“Including adjustments for the remuneration of teachers, a total of R24,3bn will be added to education and skills spending over the next three years which rises from R190bn next year to R215bn in 2013-14,” Gordhan said..
The expanded public works programme will get R73bn over the next three years and R20bn has been made available for tax incentives for job creating manufacturing investment. Promotion of investment in the industrial policy action plan will be funded by R10bn over the next three years with substantial amounts being set aside over this period for green economy initiatives.
Adding to the job-creation initiative will be the R808bn to be invested in infrastructure by government and state-owned enterprises over the next three years.
The budget deficit
A slightly more expansionary fiscal stance was adopted by Treasury with the reduction of the budget deficit over the next three years being slower from previous projections to maintain a moderate growth in government spending.
The unexpected shift in government’s fiscal stance sees the 2010-11 deficit of 5,3% being maintained in 2011-12 instead of falling to 4,6% as envisaged by Gordhan in his medium term budget policy statement in October. It is projected to fall to 4,8% (3,9%) in 2012-13 and 3,8% (3,2%) in 2013-14.
Ultimately government would like to work towards a balanced budget or even a surplus, Gordhan said, to cushion the country when the business cycle turned downwards.
Gordhan said in his budget speech that “the impact of the slightly slower growth in revenue and the additional expenditures is that the deficit for next year is half a percentage point of GDP higher than we projected in October.
The trend remains downwards however. This reduction in the deficit over the next three years is consistent with stabilising the growth in our debt and the conduct of a countercyclical fiscal policy.”
Company taxes in particular were lower than anticipated and government also had to allocate funds for flood relief.
The total public sector borrowing requirement will amount to R276,4bn in 2011-12, or 9,5% of gross domestic product.
Gordhan said non-interest spending on public services would grow by an average of 8% a year, well above the projected inflation rate rising from R897bn in 2010-11 to R1,2 trillion in 2013-14.
Tax revenue of R672bn is expected for this year, 12,3% higher than last year and R824,5bn in 2011-12. “Personal income tax has increased strongly as have VAT receipts and customs duties. However corporate income tax revenue has remained below projections, indicating the effect of the 2009 recession on company profits,” the minister said.
Government projects real GDP growth of 3,4% this year, 4,1% in 2012 and 4,4% in 2013. This compares with last year’s 2,8%.
Inflation is forecast to remain within the target range of 3-6%.
The budget makes R94bn available in addition to baseline allocations and also makes provision for a substantial unallocated contingency reserve of R4bn in 2011-12, R11bn the following year and R23bn in 2013-14.
Gordhan said this allowed for unforeseeable and unavoidable spending requirements next year and future policy priorities over the medium term. This could include financing of the national health insurance scheme.
Education will take up the largest share of government non-interest spending of R808,3bn – with basic education’s allocation 10,6% up at R145bn and higher education 9,7% higher at R189,5bn..
Health gets R113bn in 2011-12,9,8% more than this year. Total expenditure on public order and safety functions will amount to R91bn – an increase of 8,2% rising to R105bn in 2013-14. A total of R19bn will be spent on rural development and agriculture in 2011-12 rising to R21bn in 2013-14. Consolidated government transport spending will amount to R66bn next year rising to R80bn by 2013-14.
Social security spending amounts to R147bn in 2011-12 – a 10,7% increase over this year – rising to R172bn in 2013-14.
Treasury’s fiscal framework makes provision for an average annual growth in civil servants salaries by 6,6%.
The general fuel levy will increase by 10c a litre on both petrol and diesel on April 6 and the Road Accident Fund levy by 8c to 80c a litre.
Treasury has for the first time released data on tax revenue foregone as a result of various tax incentives, estimating this to be about R78bn a year.
Click here to read the budget speech.
Credit to: Business day and Times LIVE