Minister Pravingordhan: 2016 Budget Speech

Honourable Speaker

Mister President

Mister Deputy President

Cabinet Colleagues and Deputy Ministers

Governor of the Reserve Bank

MECs of Finance

Fellow South Africans

I have the honour to present the 2016 Budget of President Zuma's second administration. We do so in a spirit of frankness, both about our challenges and the opportunity to turn our economy's direction towards hope, confidence and a better future for all.

Low growth, high unemployment, extreme inequality and hurtful fractures in our society - these are unacceptable to all of us. I have a simple message. We are strong enough, resilient enough and creative enough to manage and overcome our economic challenges.

All of us want jobs, thriving businesses, engaged professionals, narrowing inequality, fewer in poverty. All of us want a new values paradigm, a society at peace with itself, a nation energised by the task of building stronger foundations for our future society and economy.

We want our government to function effectively, our people to work in dignity, with resources for their families, decent homes and opportunities for their children. We want to see progress throughout our land, in agriculture, manufacturing, mining, construction, tourism, science and research, sport and leisure, trade and commerce.

It is within our grasp to achieve this future. It requires bold and constructive leadership in all sectors, a shared vision, a common purpose, and the will to find common ground. Above all we need action, not just words.

Let us unite as a team, sharing our skills and resources, building social solidarity, defending the institutions of our democracy and developing our economy inclusively.

We do have a plan, to:

Manage our finances in a prudent and sustainable way,

Re-ignite confidence and mobilise the resources of all social partners,

Collectively invest more in infrastructure to increase potential growth,

Give hope to our youth through training and economic opportunities,

Protect South Africans from the effects of the drought,

Continuously improve our education and health systems,

Accelerate transformation towards an inclusive economy and participationby all,

Strengthen social solidarity and extend our social safety net.

The Budget rests on the idea of an inclusive social contract, encompassing an equitable burden of tax and a progressive programme of expenditures.

The Budget relies on institutions of good governance and a public ethic that values honesty and fairness.

If we act together, on these principles, as public representatives, civil servants, business people, youth, workers and citizens, we can overcome the challenges of tough economic times and difficult adjustments.

In acting together we can address declining confidence and the retreat of capital, and we can combat emerging patterns of predatory behaviour and corruption.

We are conscious of the difficulties we face. Our resilience as a nation, black and white, can propel us to a better future if we make the right choices.

Honourable Speaker, I hereby table before the House:

The 2016 Budget Speech,

The 2016 Budget Review, including

The fiscal framework,

The revenue proposals, customs and excise duties and estimates of national revenue, and

Our responses to the Budgetary Review and Recommendation Reports,

The Division of Revenue Bill,

The Appropriation Bill, and

The Estimates of National Expenditure.

In addition, I am introducing the Revenue Laws Amendment Bill 2016 to adjust certain provisions regarding to retirement funds, and related matters.

These are our budget proposals, and I look forward to further engagement through the Parliamentary budget process.

Overview of the Budget

Honourable Speaker, the past year has seen a deterioration in the global economy. In our own region, weaker business confidence coincides with a severe drought, bringing with it rising prices and threats to water supply in many areas. In addition we are obliged to confront the impact of slow growth on our public finances, while continuing to respond to the expectations of citizens and communities for improved education, reliable local services and responsive public administration.

The combination of multiple demands and constrained resources at times seems overwhelming. How does the state deal with such complexity? What should we prioritise?

As in the past, we have sought advice from citizens. This year, I sought budget pointers on several specific things: What does government do well? What should we stop doing?

How can we achieve inclusive growth?

On what we do well, South Africans have very clear views: Tax administration. And paying social grants.

What we should stop doing: Corruption and waste. Bailing out state entities.

How to support inclusive growth : Support for small business. Job opportunities targeting the youth.

I greatly appreciate the response from so many South Africans - over 1500 in all. MrFaiekSonday, and MsThuliNgubane are with us today. MrSonday's advice was that we should build more roads and train routes, because the sooner you get a worker at the desk or machine the more productive the economy will be. And MsNgubane expressed the views of so many tipsters: Let our schools' infrastructure be improved so that all schools are conducive to learning. This will ensure that we produce the quality of students that can take our country forward.

We agree, and indeed these are central priorities of the National Development Plan. As points of departure for the 2016 Budget, Honourable Speaker, allow me to emphasise several broad principles that flow through our NDP:

It is a programme for inclusive growth - our social programmes, industrial action plan, promotion of agriculture and rural development, skills and training initiatives, investment in housing and municipal services are aimed at both prosperity and equity, creating opportunities for all and broadening economic participation.

It is a plan for a strong mixed economy- in which public services and state actions complement private investment, expansion of trade and social enterprise.

It recognises that improvements in the quality of education are the foundations of broad-based growth, productivity improvement and sustainable growth.

It acknowledges that investment in infrastructure has to be enhanced and sustained both to underpin economic growth and address the spatial inefficiency and fragmentation of the apartheid landscape.

It emphasises that employment creation has to be accelerated if growth is to be inclusive, and that income security for all relies also on appropriate social security, health services and social development programmes.

It prioritises building the capability of the state, and strong leadership throughout society, to drive development and promote social cohesion.

It highlights that partnership between government, business, organisedlabour and civil society is the key to policy coherence and more rapid development.

The Budget tabled today is guided by the NDP. It is a budget for inclusive growth, it emphasises partnerships amongst role players in our economy, it prioritises education and infrastructure investment, it supports employment creation and it contributes to building a capable, developmental state.

In brief, we propose the following:

Against the background of slow growth, rising debt and higher interest rates, the pace of fiscal consolidation will be accelerated. The budget deficit will be reduced to 2.4 per cent by 2018/19.

The expenditure ceiling is cut over the next three years by R25 billion, mainly by curtailing personnel spending.

Tax increases amounting to R18 billion in 2016/17 are proposed, and a further R15 billion a year in 2017/18 and 2018/19.

An additional R16 billion is allocated to higher education over the next three years, funded through reprioritisation of expenditure plans.

Taking into account projected increases in the cost of living, R11.5 billion is added to social grant allocations over the next three years.

Funds have been reprioritised to respond to the impact of the drought on the farming sector and water-stressed communities.

In support of growth and development, Honourable Speaker, our initiatives are also aimed at enabling and mobilising private sector and civil society capacity.

Building on the success of our Renewable Energy initiatives, the Independent Power Producers Programme will be extended to include coal and gas power projects over the period ahead.

Measures to strengthen tourism, agriculture and agro-processing are in progress.

Collaboration with regional partner countries is being stepped up to improve border management, streamline trade flows and invest in transport and communications corridors.

Investment in our cities is being accelerated, creating opportunities for participation of developers and other partners in housing, infrastructure and commercial development.

Regulatory challenges that affect mining investment and employment are being addressed.

A pathbreaking study of the cost of doing business has been completed, and municipalities are working on identified reforms.

Progress has been made towards a minimum wage framework, and to reduce workplace conflict.

The National Health Insurance White Paper has been published, and proposals for comprehensive social security will be released by mid-year.

Engagement with social partners needs to be intensified. Project plans and investments need to be managed and implemented.

But I know you will join me in acknowledging that the real champions of our development are the activists and entrepreneurs, officials and facilitators, who get on with the job, day by day, of managing programmes and running businesses, serving communities and meeting needs.

Our faith communities, non-governmental organisations and community volunteers all demonstrate daily that basic needs can be met with dignity. Initiatives like Operation Hydrate and Gift of the Givers have led the way in responding to the impact of the drought. The...