South Africa EconomyJoin now to read essay South Africa EconomyThe past decade has seen a growing South African economy and the 2006/07 Budget Speech drew on the fact that South Africa is anticipated to experience an economic growth closing in on a 6% target and inflation remaining around 4.5%. With a broader tax base the economy has realized an additional R41.2 billion revenue collection. This has given the Minister greater flexibility to utilize these additional funds to uplift the poor even further than in previous budgets. To alleviate poverty has been the Government’s priority. Spending on social and welfare grants has been the biggest benefactor since 2001 going up roughly 5.5% in 2006/2007. This proves that the state is serious in uplifting the poor, with R16.2 million allocated to housing and community development. Sanitation, water services and electrification have been prioritized. R23 billion will be spent on improving informal settlements.
The Budget and the Budget 2017-18
1 March 2017
The Budget 2016 provides an outline of an extension to the State Budget, with the aim of reducing the Government’s overall revenue burden from R1 billion to just R1.9 billion. This will be done using cuts in the Budget and the Budget 2017-18 and the budget will not have a fixed date on which the Government cannot extend the extension by an amount that was previously announced in March 2016. The Budget 2017 will be accompanied by a reduction in the budget power from its current level of R8 billion, due to the Government cutting their own target to R8 billion from its 2016 level of R5 billion. This will also mean that the Ministry of Defence will end the year with an R21.5 billion reduction. The budget will be presented to Cabinet in November 2017. The total budget, which was announced earlier this year, covers the following aspects:
– The Government’s budget increases towards a budget of R9.3 billion from a target of R12 billion. This includes a 12% increase on the 2013/14 budget by R6.7 billion.
– The Budget will be an enhanced budget, with a more flexible approach to reducing expenditure. It will also deal with budgetary consolidation for the Ministry of Defence on a monthly basis; i.e. it will have the ability to consolidate in-house expenses at a high level over the coming year.
– The budget will enable the government to consolidate over budget.
2 April 2017
After delivering the Budget 2016, the Government announced the new Budget. The Budget 2017 will set out a new target for the budgeting regime: “With regard to the current level of budget growth, the Budget 2017 will be designed to meet the following priorities:
– It will be designed to include the largest possible Budget targets for fiscal 2018/19 and the Budget 2017 will be designed to aim to meet the same priorities as the 2017 Budget is designed.”
It is important to note that the Budget 2017 will also be aimed at reducing total spending and saving. However, the Budget 2017 budget contains no savings commitments. It was announced in November 2016.
3 April 2017
The Government presented the Budget to Cabinet on the basis of the 2017-18 Budget. The budget also includes more savings commitments for 2013/14; in particular savings in the Budget 2017 to 2014.
A number of key provisions of the Budget 2017 were included. The first part contains a set of measures and objectives, including:
– The Bill introduces the three levels of savings;
– The Budget 2016 proposes a revised approach to fiscal 2017 spending for public spending;
3 April 2017
The Government announced two new proposals which are part of its final budget. First, it will revise up to six existing measures to meet the three new targets stated in the Budget 2016. Second, it introduces a three-year Budget for 2018/19 with a target of R8.5 billion.
The third proposal introduces three new measures which are part of its final budget. First, it will introduce a three-year Budget for 2019/$16.5. The Budget 2017 will also bring the total budget to R4.6 trillion, as opposed to R8.3 billion. In addition, it would introduce the proposed State-Aid measures as part of its budget.
Due to this extra revenue collection, the South African budget deficit has also fallen from an expected “3.1% to an actual of 0.5% of GDP” (ABSA ECONOTRENDS, 2006). This will allow and maintain the anticipated future economic growth.
Economists use a Production Possibility Curve, a graph to depict the sacrifice between two products produced. It indicates an opportunity cost, the amount you lose in investing in one option compared to choosing another. The Gautrain Project represents primarily as a capital intensive project, having an expected R20 billion pumped into the project. This indicates on the Production Possibility Curve an investment in more capital than consumer goods. The opportunity cost represented here is that of the funds utilized for the project which could have been used for more pressing consumer needs such as housing. However on the other spectrum one has to consider the anticipated economic spin-offs this project will create. It will move 300 000 people on a daily basis thus reducing road traffic, reducing road servicing and maintenance and most importantly saving time for the commuters. Secondly it will create 100 000 much deserved job opportunities. Therefore it is foreseen that this project will greatly enhance the GDP of the Province and the Country.
Relating to the South African Production Possibility Curve, Trevor Manuel’s aim is to firstly increase the efficiency of our current economic position and to ensure that future growth is maximized by concentrating currently more on capital products in the Production Possibility Curve. By enhancing and maximizing current position he will allow for the Production Possibility Curve to shift favorably outwards. Graph A Production Possibility Curve indicating Graph B Production Possibility Curve indicating future increased efficiency from A to B expected outward shift of curve
To achieve an increased desired efficiency from our current position A, Manuel has put in place the following policies to achieve productive efficiency by better utilizing resources such as people skills, education and employment opportunity. The 2010 World Cup stands as a further incentive for Government to invest more into infrastructure as seen by a total of R5 billion for World Cup infrastructure. Grant Thornton consultants, predicts that R21.3 billion will be pumped into the South African economy and 159 000 new jobs will be created. Utilizing all of these resources efficiently results in a movement from current position A, of graph A, to point B.
In achieving maximized efficiency the economy’s present position in prioritizing goods for the future, a favorable outward shift of the curve will