In his weekly letter to the nation, President Cyril Ramaphosa explained how the budget speech reinforced the State of the Nation Address (SONA) plans to grow the economy and create jobs.
The Covid-19 pandemic has meant a lot more money being spent, with a lot less money pumping back into the economy. Borrowing money to fill gaping holes in the economy therefore had to be done “at a higher cost”.
“As I told Sona, the only way out of this dire situation is to grow the economy. And the most effective way to sustainably reduce poverty and hunger is to create jobs.
“That’s why the pursuit of growth and jobs is central to the agenda outlined in both Sona and the budget,” Ramaphosa said.
The measures announced during Finance Minister Enoch Godongwana’s budget speech aim to support the creation of new businesses to create jobs, improve access to basic services and unlock business potential to get South Africans back on their feet.
“With this budget, we are now on track to reduce our fiscal deficit – and therefore our borrowing needs – while addressing the challenges that South Africans face, now and in the future.”
Read his full letter below.
Dear South African friend,
Last week, Finance Minister Enoch Godongwana presented a budget that supports and reinforces the agenda I announced in the State of the Nation Address (SONA) to grow the economy and create jobs.
The budget provides details on how the government plans to raise funds and where it will spend the money to improve the lives of South Africans.
Few South Africans need to be reminded of how devastating the COVID-19 pandemic has been to our economy. Despite the significant economic and social support program we introduced in 2020, businesses went bankrupt and up to two million people lost their jobs.
Many households have only been spared from hunger thanks to the increase in social allowances. As the pandemic has hit the economy, it has further worsened the country’s financial situation.
At the height of the pandemic, less revenue was collected and more money had to be spent to strengthen our health response and provide social support. As a result, the country had to borrow more and do so at a higher cost. The pandemic followed a decade of huge increases in government spending, even as economic growth remained weak.
One of the most important tasks of this administration has been to restore the health of our public finances so that the government can play its role effectively. As I said in SONA, the only way out of this dire situation is to grow the economy. And the most effective way to sustainably reduce poverty and hunger is to create jobs.
This is why the pursuit of growth and employment is at the center of the program described in both the SONA and the Budget. This program includes far-reaching economic reforms that promote investment and growth.
These reforms will ensure that our country has enough affordable electricity to meet growing demand, that our ports and rail lines are more efficient, that we improve access to faster and cheaper broadband, that homes and businesses have the water they need and that we can attract the skills and investment we need to create a productive and vibrant economy.
At a time when public resources are limited, these reforms will allow greater private investment in the vital infrastructure our economy needs to grow. This is accompanied by a revised framework for public-private partnerships and new, innovative ways to combine public and private resources for infrastructure investment. We will do this in a way that improves the performance and financial condition of major public companies.
This will put these companies in a much better position to fulfill their development mandates, while ensuring that critical national infrastructure remains firmly in state hands.
To support this work, R17.5 billion has been allocated in the budget for catalytic infrastructure projects over the next three years. This will support, among other things, the modernization of roads, bridges, water and sewage, transport, schools, hospitals and clinics.
The budget supports the efforts announced in SONA to unlock the potential of small, micro and informal enterprises. For example, R15 billion has been set aside for a revamped loan guarantee scheme that will make it easier for small businesses to access finance to ‘bounce back’ from the effects of the pandemic.
The employment tax incentive, which has been so successful in giving many young people their first job, is being expanded to encourage small businesses to hire more people. Recognizing the importance of basic services both for quality of life and for investment and business activity, the budget significantly increases the allocation for service delivery.
For example, it adds an additional R30.7 billion to local government allocations for basic municipal services. All of these measures encourage business growth and expansion and support the establishment of new businesses to create new jobs.
These efforts, however, will take time to absorb the millions of South Africans looking for work. We have therefore extended the Presidential Job Stimulus Program, which has provided work and livelihood opportunities to more than 800,000 people in its first 16 months.
An additional R18.4 billion has been allocated over the next two years so that the recovery can continue to provide living income, skills development and work experience to hundreds of thousands of unemployed people, mainly young people. youth.
The budget also supports the extension of the R350 Distress Welfare Grant for another year. This will provide basic support to around 10 million unemployed beneficiaries in their job search. This subsidy greatly expands the country’s social safety net, with approximately 46% of the population now receiving subsidies.
In short, it is a budget that seeks to leave no one behind. Even with our difficult fiscal situation, the budget directs resources to areas with the greatest potential for growth and jobs, in particular structural reform, infrastructure and support for small businesses.
At the same time, it supports young people through public and social employment programs and extends social protection to the most vulnerable. While promoting growth, the budget also charts a clear path towards sustainable levels of public debt. The interest rate we pay on our debt is higher than our rate of growth, creating a risk that debt will spiral out of control if not carefully managed.
Our country now spends more on debt service than on health care, basic education, and policing. Unsustainable debt levels are bad for all South Africans, but the poor in particular. The cost of debt reduces the amount of money available to the government to improve services, provide social protection and invest in social and economic infrastructure.
With this budget, we are now on track to reduce our budget deficit – and therefore our borrowing needs – while addressing the challenges that South Africans face, now and in the future.
The budget demonstrates our ability and our commitment to achieve this balance. It’s a difficult balance to strike, but with more efficient use of resources, ending waste and corruption, and shifting consumer spending to investment, we can achieve fiscal sustainability while continuing to support the growth.
Our country’s road to recovery is steep and will be extremely difficult.
But with the measures that we have defined in SONA, with the budget that has been presented, and with the cooperation and involvement of all South Africans, we will succeed.
With my best wishes,