2017 Budget Speech

2017 Budget Speech Pravin Gordhan Minister of Finance 22 February 2017 ISBN: 978-0-621-45120-7 RP: 11/2017 To obtain copies please contact: Communications Directorate National Treasury Private Bag X115 Pretoria 0001 South Africa Tel: +27 12 315 5944 Fax: +27 12 406 9055 Budget documents are available at: www.treasury.

ov.za Honourable SpeakerMister PresidentMister Deputy PresidentCabinet Colleagues and Deputy MinistersGovernor of the Reserve BankMECs of FinanceFellow South Africans Sanibonani Molweni Goeie middag Thobela I have the privilege to present our Government's budget for the fiscal year 2017/18, and the framework for the next three years.

I am mindful, in the context of our own transformation challenges and the stresses in the global environment, of Oliver Tambo's unwavering vision: "We seek to create a united, democratic and non-racial society. We have a vision of South Africa in which black and white shall live and work together as equals in conditions of peace and prosperity.[We seek to] remake our part of the world into a corner of the globe of which all of humanity can be proud.

" In the words of the Freedom Charter, "South Africa belongs to all who live in it." In drafting our Constitution, this was a central foundational principle, and so the values of freedom, dignity and equality are embedded in our law and our polity.

This is also why our Constitution requires that all who live in our country should have access to housing, medical care, social security, water and education, There should be a progressive realisation of access to tertiary education and other elements in a comprehensive set of social entitlements. Wealth and economic opportunities must be equitably shared.

These commitments impose obligations on government and have implications for the business sector and all stakeholders. We have a shared responsibility to address the social and economic challenges before us.

These South African realities are known to all of us.Income growth has been uneven - the bottom 20 per cent have benefited from social grants and better access to services, the top 20 per cent have benefited from the rising demand for skills and pay increases.

Those in the middle have been left behind.Wealth remains highly concentrated 95 per cent of wealth is in the hands of 10 per cent of the population.

35 per cent of the labour force are unemployed or have given up hope of finding work.Despite our progress in education, over half of all children in Grade 5 cannot yet read adequately in any language.

More than half of all school-leavers each year enter the labour market without a senior certificate pass. 75 per cent of these will still be unemployed five years laterOur towns and cities remain divided and poverty is concentrated in townships and rural areas.

Our growth has been too slow just 1 per cent a year in real per capita terms over the past 25 years, well below that of countries such as Brazil, Turkey, Indonesia, India or ChinaThese are our realities. They mirror the stresses of poverty and vulnerability in many developing countries, and the inequality between rich and poor throughout the world.

Even in the developed world, there are serious faultlines and uncertainty:Citizens lack of trust in elitesGrowing inequalityGlobalisation benefitting a fewStagnant and falling incomes of the middle class.These, among other factors, are also driving a case for radical transformation of economic models, and a call for inclusive growth.

President Zuma has rightly emphasised that the requirements for transformation and change in South Africa are wide-ranging. Laws and regulations, policies and their implementation, initiatives of national, provincial and local government, our black economic empowerment charters and the engagement of business, organised labour and civil society partners are all critical levers of change.

So is our budget.This is not a transformation to be achieved through conquest, conflict or extortion, as in our past.

We do not seek to reproduce the racial domination that was the hallmark of apartheid nationalism Our transformation will be built through economic participation, partnerships and mobilisation of all our capacities. It is a transformation that must unite, not divide South Africans.

This is the task entrusted to us by Oliver Tambo, Helen Josephs,Walter Sisulu and Rolihlahla MandelaWe find ourselves at a conjuncture which requires the wisdom of our elders to help us make the right choices and keep the trust of our citizens.Summary of the 2017 Budget Madam Speaker, today's Budget message is that we are once again at a crossroads.

Tough choices have to be made to achieve the development outcomes we seek:Economic growth is slow, unemployment is far too high and many businesses and families are under stress.We face an uncertain and complex global environment.

At the same time we face immense transformation challenges we must overcome the inequalities and divisions of our society. All South Africans must share in a more prosperous future.

We have a plan for a more inclusive, shared economy. Its implementation requires greater urgency and effective collaboration among all social stakeholders.

Change is difficult, and often contested. In these tough times we draw strength from the resilience and the diverse capabilities of our people, our business sector, our unions and our social formations.

The key features of the framework for the 2017 Budget include the following:Expenditure is within the envelope projected in last year's budget.An additional R28 billion will be raised in taxes.

The budget deficit for 2017/18 will be 31 per cent of GDP, in line with our fiscal consolidation commitment.Government debt will stabilise at about 48 per cent of GDP over the next three years.

Redistribution in support of education, health services and municipal functions in rural areas remains the central thrust of our spending programmes.Government's wage bill has stabilised.

Procurement reforms continue to improve the effectiveness of public spending and opening opportunities for small business participation.Our state-owned companies and finance institutions play a substantial role in infrastructure investment and financing development.

Their borrowing requirements are taken into account in the overall fiscal framework.As in past years, Honourable Members, the Budget Review and the Estimates of National Expenditure provide extensive details of developments in the economy, our fiscal and budget plans and the programmes and activities of government departments and public entities.

But there is a larger purpose, a moral vision and intent behind these plans and programmes. We need to build a new national consensus and a new commitment to deliver, focused on the triple challenges of poverty, unemployment and inequality.

President Zuma articulated this intent in the State of the Nation Address, rightly emphasising the radical nature of the socioeconomic transformation we need.Our growth challenge is intertwined with our transformation imperative.

We need to transform in order to grow, we need to grow in order to transform Without transformation, growth will reinforce inequality without growth, transformation will be distorted by patronage.Global economic outlook Madam Speaker, allow me to comment briefly on the international outlook.

After several years of tentative economic growth, there are signs that a more sustainable recovery might be under way.Growth in the United States and Europe is steady, although at low levels.

India and China remain comparatively buoyant, and economies such as Russia and Brazil are set to recover from recessions.The International Monetary Fund projects that the world economy will grow by3.

4 per cent in 2017 and 36 per cent in 2018.Many countries face the challenge of ensuring that as growth picks up, its benefits accrue to all in society.

The 2008 financial crisis and its aftermath exposed deep fault-lines in the world economy and in the distribution of income. Economic recovery has been slow.

In several countries affected by unrest or war, there has been great hardship and dislocation of people. The impact of trends in trade, technology and commodity markets has been uneven.

These forces have heightened social and political pressures for change. Global strains manifest in various ways, including the rise of strident economic nationalism and protectionist policies.

Government and business leaders throughout the world have had to reflect on the deficit of trust and loss of social solidarity in their societies. Policies and programmes that strengthen economic inclusion are being prioritised everywhere.

In the words of Pope Francis, "Reforming the social structures which perpetuate poverty and the exclusion of the poor first requires a conversion of mind and heart". We therefore welcome Germany's commitment to highlighting Africa and its infrastructure financing requirements as a priority of its term in chairing the G20 countries.

We operate within a connected global economic system South Africa's economic performance is affected by global economic trends. We rely on global cooperation to address trade imbalances, the abuse of tax havens and the coordination of financial stabilisation efforts.

South Africa, and the entire African continent, stand to gain from expanding global trade within what Minister Davies has described as a "more inclusive progressive multilateralism, characterised by real cooperation and solidarity, sensitive to the needs of the poorest."South Africa's growth and transformationModerate GDP growth recovery Our expectation at this stage is that GDP growth will increase from 05 per cent last year to 13 per cent in 2017, and will continue to improve moderately over the medium termThe services sector was the main contributor to growth in 2016, bringing nearly 120 000 new work opportunities.

Mining continued to underperform while manufacturing output was supported by...