South Africa remains fiscally resiliant, but the Finance Minister could have been bolder on growth and infrastructure

South Africa's fiscal resiliance is higlighted by a decrease in our budget deficit from a forecast 5,2% to 4,6% of GDP. But the fact that Finance Minister Pravin Gordhan had the space to do this shows that he could have been bolder on a plan to drive growth and build infrastructure.

The global economy is forecast to grow at 3,3% this year, and Africa at 5,5%. It is clear that our growth of 2,7% is not good enough, and this budget should have done more to accelerate growth across the economy.

The biggest disappointment in the speech is the news that the Youth Wage Subsidy is not going to be implemented on the date announced by Treasury last year: 1 April 2012. The Finance Minister pays lip service to creating jobs for young people, but allows the ANC's alliance partners to hold up the implementation of the Youth Wage Subsidy and therefore block a policy that would create jobs for hundreds of thousands of young people.

We welcome the tax breaks for savings and small businesses, as well as the potential reduction in corporate tax in Special Economic Zones. We are also pleased to see steps to improve procurement processes, as well as the commitment to lower the cost of doing business, but achieving these objectives will actually require regulatory reform across the economy, and the Minister did not announce a clear plan to undertake this.

On social spending, the Democratic Alliance welcomes the provident fund for domestic and farm workers, as well as the additional resources allocated to education. We believe investing in human capital is fundamental to expanding the circle of opportunity to more and more people. The minimal increase in the state pension paid to senior citizens, however, is cause for concern because it does not take into account full annual increases in the cost of living.

Similarly, while the increased allocation to the health sector will go some way towards improving access, we query the R1 billion to be spent on National Health Insurance pilot projects when it is clear that fundamental governance problems, as well as skills shortages, remain.

In terms of increased infrastructure spending, this budget seems to fall short on the promise in the President's State of the Nation Address. This time last year the Finance Minister announced that the public sector would be spending 8,1% of GDP on infrastructure in 2012. Today we found out that there has actually has been a small drop for 2012 to 7,9% -in a year when we are meant to be ramping up infrastructure spending.

The Minister alludes to increased spending after 2015, but the reality is we need to accelerate infrastructure spend to around 10% of GDP far sooner if we are to make a dent in our estimated R 1,5 trillion infrastructure backlog.

Further underlining the importance of the quality of spending, the minister announced today that, in 2010, the state-owned enterprises (SOEs) failed to spend almost R60bn - or 40% - of the money they were given to build infrastructure.

Unless we can both increase the amount we spend on infrastructure and improve our capacity to spend additional funds, we will not be able to accelerate economic growth.

The Minister has announced several new bureaucratic bodies to try to improve infrastructure delivery. These may help, but a simpler solution would be for government to partner with the private sector, which delivers at risk of contractual penalties, and doesn't have the luxury of tax-payer bailouts. Only 4% of total infrastructure spending was done through public-private partnerships in 2010. This should be scaled up dramatically to improve delivery.

We should also be bolder in injecting private sector capital into the SOEs. Earlier this month Brazil sold 51% of a state-owned airport to a private investor for around R70bn, raising the equivalent of a quarter of South Africa's total public infrastructure budget for 2012.

In this regard we strongly disagree with the R1 billion planned recapitalisation of Denel and Alexkor. These entities have become a liability and should rather be sold: the proceeds could go to to funding infrastructure.

Statement issued by Tim Harris MP, DA Shadow Minister of Finance, February 22 2012

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