Minister of Finance Pravin Gordhan Presents the 2013 Budget Speech

Honourable Speaker

Mister President

Mister Deputy President

Fellow Cabinet Colleagues and Deputy Ministers

Governor of the Reserve Bank

MEC’s of Finance

Fellow South Africans

Ladies and Gentlemen

Honourable Speaker

I have the honour to present the fourth budget of President Zuma’s administration. Mr President you said in the State of the Nation address that “we should put South Africa first. All of us have a patriotic duty and responsibility to build and promote our country.” You further said “The National Development Plan provides a perfect vehicle for united action precisely because it has the support of South Africans across the political and cultural spectrum. Leaders in every avenue should be ready to rise above sectional interests and with great maturity, pull together to take this country forward.”

This challenge applies to all sections of our society: business, labour, public representatives, activists and citizens in every part of the country. As we pointed out in the 2012 Budget, global economic uncertainty will remain with us for some time.

South Africa’s economic outlook is improving, but requires that we actively pursue a different trajectory if we are to address the challenges ahead. Under your leadership Mr President, we have opened new channels of communication and built more cohesion among key stakeholders in South Africa. We have taken many steps to create the conditions for higher levels of confidence in our economy and society. Now we are ready to implement the National Development Plan.

South Africans have a rich history of acting together for a better future. Thirty years ago, the United Democratic Front brought together people of goodwill and foresight from all corners of the country. Many points of view, many differences in approach, were marshalled around a single cause - building a united and non-racial society. We did the same for the first democratic elections in 1994 which laid the basis for an enduring democracy.

The Reconstruction and Development Programme is the foundation on which we build. It said:

“It is this collective heritage of struggle, these common yearnings, which are our greatest strength… At the same time the challenges facing South Africa are enormous. Only a comprehensive approach to harnessing the resources of our country can reverse the crisis created by apartheid. Only an all-round effort to harness the life experience, skills, energies and aspirations of the people can lay the basis for a new South Africa.”

The schools, clinics, taps and houses we have built since then are testimony to the truth of these assertions. The freedom and democracy we cherish - and the knowledge that these are permanent, inalienable rights grounded in our basic law - are the foundation on which all South Africans can make a contribution.

• Looking back on the path we have travelled since 1994, we see the importance of a long-term perspective on development and change. It is people acting together for a common vision that connects the past to the present, and makes a better future possible.

The challenge for us, honourable members, is that people are asking if we can sustain our “miracle”. They are asking whether we as a nation have the ability, the will and the wisdom to take another leap forward in reconstructing and developing South Africa. They are asking whether South Africans can still show the world how to overcome intractable problems that face the community of nations. In these trying times, South Africans too ask the question, “can we be a winning nation?”

Of course we can!

As Benedict Mongalo, a young man from Johannesburg, writes in his tip: “We all acknowledge that unemployment, poverty and inequality are the greatest challenge facing our country… We will not eradicate this problem overnight… This is like manually moving a mountain and the only way to do it, is to move one rock aside and the next generation, or next government, will do the same until this mountain is moved.”

Hope and confidence come from energetic involvement and a willingness to make a direct contribution to change. The imperatives of change are not just challenges to government, they confront all of society. A new framework for development is an opportunity to unite around an inclusive vision, and join hands in constructing a shared future.

The National Planning Commission has cautioned that our development objectives will take time and hard work to achieve. Measured year by year, district by district, there will be advances and there will be setbacks. But in each five-year term of government we must demonstrate, as we have since 1994, that we can meet more demanding milestones - more jobs, more enterprises, more technological innovation, better housing, progress in education and health.

Working together we all know that we can do better. All of us - citizens, taxpayers, public servants, teachers, activists, managers, workers - we all have a shared future, and we have a shared plan to make it work.

The Batswana say, “Sedikwa ke ntšwa pedi ga se thata” - working together we can do more! Let’s join forces and make South Africa work!

Overview of the 2013 Budget

Mister Speaker.

The 2013 Budget is presented in challenging times, but against the background of a new strategic framework for growth and development. This is a budget in which there is limited room for expansion, yet there are significant opportunities for change.

There are signs of improvement in the world economy, though the outlook remains troubled. South Africa’s economy has continued to grow, but at a slower rate than projected at the time of the 2012 Budget.

The 2013 Budget takes the National Development Plan as its point of departure. The strategic plans of government and the medium-term expenditure plans will be aligned to realise our objectives.

Government has taken measures to control growth in spending. Spending plans have been reduced by R10.4 billion through reprioritisation, savings and a draw-down on the contingency reserve. Government remains committed to a large-scale infrastructure investment programme.

Our path of spending and the recovery in revenue will stabilise debt at just higher than 40 per cent of GDP. The budget deficit will fall from 5.2 per cent of GDP in 2012/13 to 3.1 per cent in 2015/16.

A review will be initiated this year of our tax policy framework and its role in supporting the objectives of inclusive growth, employment, development and fiscal sustainability.

In the 2013/14 fiscal year, personal income tax relief of R7 billion is granted. A new local government equitable share formula is proposed, providing a subsidy for free basic services designed to reach 59 per cent of households.

Further education and training will continue to be extended and enhanced. In this budget we continue to invest in education, health, housing, public transport and social development - components of the social wage which add up to about 60 per cent of public expenditure.

As part of a package of measures aimed at boosting opportunities for young work seekers, government recognises the need to share the costs of expanding job opportunities with the private sector. And following careful consideratoin of inputs from various stakeholders, a revised youth employment incentive will be tabled in the House after consultation with various stakeholders, together with a proposed employment incentive for special economic zones. I quote from the Budget Review:

“Government’s existing approach to supporting employment growth focuses on training, skills development, labour market activation and short-term public employment. Programmes in support of these objectives include sector education and training authorities, further education and training colleges, small enterprise support, the Industrial Policy Action Plan, the expanded public works programme and the community work programme. To complement existing programmes, a tax incentive aimed at encouraging firms to employ young work seekers will be tabled for consideration by Parliament. The introduction of this tax incentive, which takes into account the concerns of organised labour, will help young people enter the labour market, gain valuable experience and access career opportunities.

The administratively simple incentive will create a graduated tax incentive at the entry-level wage, falling to zero when earnings reach the personal income tax threshold. Protection provided by existing labour legislation, combined with oversight by the South African Revenue Service and the Department of Labour, will limit any displacement that might arise. A similar tax incentive will be made available to eligible workers of all ages within special economic zones.”

Global situation

Mister Speaker,

There are signs of improvement in the world economy, though the outlook remains troubled. Growth is still muted in the United States and Japan, and much of Europe is in recession. Policy interventions by the major central banks were needed during 2012 to avert new economic and fiscal crises. Yet many advanced economies contracted during the fourth quarter of 2012 and global prospects are expected to improve only marginally, from growth of 3.2 per cent in 2012 to 3.5 per cent in 2013. Emerging markets, particularly China and India, continue to lead global growth, although at lower rates than before.

High levels of debt are inhibiting progress in many countries. Yet measures to reduce indebtedness have the effect of holding back growth. Unemployment remains high in many countries, yet technological progress continues to reduce demand for labour in many industries. Around the world, inequality is fuelling discontent.

So there are parallels between the global economic discourse and our own policy challenges. In seeking a pragmatic balance between recovery and consolidation, between economic power and social solidarity, between infrastructure investment and human development, between encouraging enterprise and...