Budgeting for 8 percent growth: The DA's budget proposals to grow the economy, create jobs, and halve poverty

Note to editors: The following statement was distributed at a press conference held in Parliament today by DA Parliamentary Leader Lindiwe Mazibuko MP, DA Shadow Minister of Finance Tim Harris MP, and DA Shadow Deputy Minister of Finance David Ross MP.

The Democratic Alliance's (DA's) Alternative Budget 2012 sets out how the national budget could be structured to help accelerate economic growth in South Africa from 3% to 8% over the medium term. It is a fiscal plan that complements our broader national 8% policy project.

If our economy were to grow by 8% a year it would double in size in ten years, with the result that, by 2022, we would have around R2 trillion to spend on service delivery a year - double what we have available to spend today.

Our approach recognises the potential in every South African and obliges the state to give each one the opportunity to succeed. Its primary tool for change is the power of markets, but it recognises that the state has an obligation to intervene when markets fail.

In particular, this Alternative Budget shows how we could, through government's fiscal policy, ensure that ordinary job seekers, workers and small businesses get a fair stake in our economy by:

• Implementing a youth wage subsidy to break down structural problems in the labour market and help create jobs for 3.3 million unemployed young South Africans;
• Helping small businesses create jobs by extending tax breaks to assist with cash flows and provide additional support services; and
• Helping promote share ownership for employees through the tax system, and extending similar benefits to unlisted companies.

In this Budget the role of the state is to make markets fairer and more competitive and provide the building blocks of opportunity such as better education; cuts in red tape; citizen protection; and the promotion of sustainable resource use.

It tables plans to ramp up infrastructure spending -even beyond levels committed to by the President in the State of the Nation Address - to tackle the R1.5 trillion backlog in infrastructure identified by the Department of Public Enterprises.

The theoretical example we use shows how it would be possible for government to do this solely by injecting private capital into state assets - avoiding an increase in the budget deficit or the public-sector borrowing requirement.

Our budget includes almost R9 billion of tax cuts, primarily to drive investment and share ownership. It also identifies R31 billion in expenditure reduction, and proposes R50 billion of new expenditure, mainly in the pursuit of higher growth and broader ownership. Importantly, it achieves these objectives while projecting a budget deficit slightly smaller than National Treasury's forecast of 5.2% of GDP for 2012.

The DA's Open Opportunity Society for All will focus on redressing the legacy of apartheid by building an inclusive economy in which job seekers, workers and small businesses get a fair share. To achieve this, the DA's budget proposals speak to five growth priorities. These are:

Job-creating Growth: These are proposals aimed at putting South Africa on a job-creating growth trajectory. Budget items in this section focus on assisting people to gain the necessary skills and education to enter the job market and compete in the global knowledge economy. They lower the barriers to entry for new job seekers, and create incentives for employers to increase hiring, most notably through the youth wage subsidy.

Inclusive Growth: Proposals in this section place special emphasis on innovative strategies to ‘capitalise the poor' by making it easier for poor and low-income South Africans to acquire assets; broadening economic opportunities by allocating additional resources to promote tax incentives for employee share ownership schemes; boosting land reform; and improving health and welfare.

Competitive Growth: Budget proposals in this section prioritise dynamism and entrepreneurship. They concern both competition within the South African domestic economy, and South Africa's competitiveness internationally. The proposals outlined aim to make it easier and safer to do business in South Africa; attract foreign investment; enhance productivity and innovation; improve the quality of government; and reduce the cost of living.

Strategic Growth: This is a central component of the Alternative Budget because it concerns how we promote South African business abroad, build beneficial relationships with key trade partners, and allocate resources in such a way as to maximise growth sustainably. It prioritises investment in infrastructure and trade while reducing expenditure on inefficient state entities.

Sustainable Growth: A prerequisite for long-term economic growth is sufficient clean energy and water. We are therefore paying particular attention to the ‘green economy'. Budget proposals in this section aim to put us on a sustainable growth trajectory and include substantial investments in fresh water infrastructure; support for a building retrofit programme to save energy; and assistance for climate change adaptation.

The budget proposals outlined in this year's Alternative Budget provide a platform to grow the economy at 8%, extend opportunity, and promote participation and ownership for all.

Placing 8% economic growth at the centre of our policy agenda will ensure that the DA moves towards the 2014 election as the party of real prosperity for all South Africans, and is an important fiscal policy contribution to this objective.

Statement issued by Tim Harris MP, DA Shadow Minister of Finance, February 20 2012

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