Pretoria - More economic activity is needed in order to advance South Africa's economy post the recession, said Finance Minister Pravin Gordhan.
Speaking during a radio interview after tabling the Medium Term Budget Policy Statement (MTBPS) on Wednesday, Gordhan said: "We need more economic activity... more entrepreneurs... more people working and that will help us collect more taxes and get people involved in the economy."
In tabling the mini budget, the minister revealed that Gross Domestic Product (GDP) growth is expected to reach 3 percent this year.
The policy statement touched on government's New Economic Growth Path; proposed harsh penalties to curb fraud and corruption; outlined government's commitment to help provide jobs and pledged an extra R100 million to help fight HIV and Aids.
"The key challenge for us now is that we've crossed the World Cup hurdle. The [challenge] is how we grow the country now but in a way in which we create more jobs and reduce poverty," explained Minister Gordhan.
He addressed ways to curb tender fraud, saying that government as well as tax payers' money should not be wasted or exploited.
"Let's open up conversation for South Africans to be aware of the amount of stealing that is going on, as well as improper conduct. All of this is contributing to a culture we will regret in 10 or 20 years time," Gordhan said.
The minister revealed that the country's budget deficit is expected to decline from 6.7 percent in 2009/10 to 5.3 percent in the current financial year. It is expected to reach 4.6 percent in the next financial year.
"On balance, the fiscal framework remains disciplined and prudent, with a focus on reducing the deficit and total debt in a gradual fashion without resorting to severe cuts in essential state services," commented Nedbank.
Markets are likely to take heart to the better than expected deficit and debt estimates, said Nedbank.
There had been speculation that more direct measures to weaken the currency would be announced when the MTBPS was tabled, however Treasury lifted exchange controls on capital outflows.
Gordhan said government views the rand as being overvalued, but also said that other developing economies were in a similar situation. However, he made it clear that Treasury is open to tax measures to contain rand strength if these prove effective in other economies.
Business Unity South Africa (BUSA) said it welcomed the budget, though it pointed out its uncertainty on whether a 3 percent overall growth can still be reached this year.
"The mini budget also embodied a significant degree of continuity and predictability, which strengthened business confidence," said Deputy CEO Raymond Parsons.
He said that the right balance between fiscal consolidation and growth friendly fiscal stance has been struck by the budget.
On the matter of an overvalued currency (which fell by about 1.9 percent to 7.0851 against the dollar after the minister tabled the mini budget), BUSA said it believed that the pro active steps will help stabIlise the exchange rate.
The steps include further relation of exchange controls on companies and individuals.
"BUSA welcomes the mini budget as an important building block in creating a substantial degree of fiscal support for an inclusive higher job rich growth path for South Africa," said Parsons.
Recently, South Africa scored first in the world in the survey of budget transparency of the International Budget Partnership.
"The 2010 MTBPS is a cautious, considered articulation of where the economy and fiscus are now and where they are likely to be going. Though some reasons for cheer are noted, assumptions concerning the recovery of GDP growth remain moderate," said the Institute for Democracy in SA (IDASA).
Of significance, IDASA said, is that even by 2013/14, real GDP growth - in relation to the need to create more jobs - is not expected to exceed five percent. "This kind of growth rate, all else being equal, is not going to create the jobs South Africa needs."
