by Piet Coetzer

South African budget in perspective

South Africa to sink or swim on the NDP


Whether South Africa will be a successful nation or not in the years to come will depend on the success of the National Development Plan (NDP). Finance minister Pravin Gordhan’s first budget proposals to be tabled within the framework of the NDP, made this clear. While, according to him, the budget " marks the beginning of a process through which government departments and agencies will align their planning and expenditure to the NDP,", major challenges to the NDP also emerged.

The 2013 budget added flesh to the NDP as an integrated strategy for accelerating growth, eliminating poverty and reducing inequality - recognising that South Africa’s urbanising, youthful population was central to achieving this objective.

A central theme of the budget speech was the imperative to ensure sustainable growth in the economy. Amid challenging domestic and international conditions, much will  depend on the success of building a broad social accord around the NDP.

“This challenge applies to all sections of our society: business, labour, public representatives, activists and citizens in every part of the country,” the minister said in his speech.

In this context, the task of Cyril Ramaphosa, newly elected deputy president of the ruling African National Congress (ANC), to promote the NDP among all sectors of South African society takes on new importance.

From Gordhan’s speech, it was clear that there has already been some success within the business community.

There is growing confidence in the business outlook, despite difficult conditions. “We recognise the key role that private companies play in our economy,” he said.

From discussions he has had with the business community plans that included construction and refurbishment by a company in the hospitality sector of R2.5 billion in the next 18 months, and expansion of R3 billion in the pipeline, emerged.

There were two telecommunications investments amounting to R14 billion this year, and capital spending of R3.4 billion over the next three years by a rail and logistics operator.

In addition, a R2.5-billion expansion and longer term plans of R15 billion in mining projects, and investment of R1.4 billion this year by a leading retailer, and plans to open 100 new stores by another.

Also planned was an expansion of R1.2 billion this year by a food and beverage sector firm, and plans for R28.5 billion in long-term infrastructure investment by a leading industrial company, which would create 10 000 temporary and 4 000 permanent jobs.


On the organised labour front, the picture that emerged was less positive, highlighting some major challenges.

According to the budget 2013/14 review document by the Treasury, tabled with the budget, the total value of losses in mining production due to the crippling 2012 strikes has exceeded the R15 billion mark, making a considerable contribution to the budget deficit.

According to the budget review document, copper production fell by 21.8%, gold by 14.5%, and platinum by 12% and mining output was not expected to recover anytime soon. “Delays in the resumption of full operations, shaft closures and fraught labour relations could constrain output for a prolonged period,” the document said.

Although mining contributes only 7% of GDP, its impact is much wider: it contributes as much as 50% to foreign exchange earnings according to some estimates. Is vital to other value chains such as some manufacturing sectors and is a major provider of employment.

In an analysis published in October last year in Leadership Intelligence Bulletin (LIB) we stated that South Africa’s collective bargaining system is under threat and in urgent need of review. The budget review document states that “the events of 2012 (on the labour front) have revealed weaknesses in South Africa's collective bargaining system".

On the strike by farmworkers in the Western Cape, it was noted that while a 50% increase in wages would boost farmworkers' income, it could also lead to job losses.

“The depth of labour frustrations in the mining and agricultural sectors is partly rooted in unsustainable economic and social conditions, sharpened by the rising cost of living.” For these sectors to prosper, employers and labour organisations had to make more concerted efforts to tackle concerns.

However, as reported in another LIB analysis the relationship between the ruling ANC and its labour alliance , the South African Congress of Trade Unions (Cosatu) is on tenterhooks. “Besides the known issues ... there are other sticky issues remaining, including Cosatu’s demands for an outright ban on labour brokers; government’s continued use of inflation targeting; Cosatu's reluctance to support the National Development Plan; and the ANC’s rejection of the nationalisation of mines.

“There are some stormy months ahead in the ANC/Cosatu relationship,”

These developments can yet have an impact on the vision contained in Gordhan’s budget, as history proved with the long delay in the introduction of a youth employment subsidy, which is now again mooted in an amended form.

Minister Gordhan said the NDP serves as a point of departure for his new budget, but this means a gradual realignment of policy and resources. As things stand, the NDP’s 

plans are based on achieving a growth rate of 5% per year. Yet actual growth is less than half – according to the minister (2.3%) over the next three years.

Apart from the ANC' relationship with Cosatu and the broader labour movement and uncertainties in the global economy, there are a number of other major challenges ahead, including the dilemma of choosing between steep rising electricity tariffs and security of supply.

Indication of the progress being made in meeting these challenges will come with the next medium-term strategic framework in October. This according to Gordhan, will reflect government's plans over the next five years on implementing the NDP as a blueprint for reducing poverty and inequality by 2030.

The NDP's aims had long been part of government's strategic planning, but it had failed to deliver due to a "lack of effective planning, inadequate state capacity, and the absence of clear lines of responsibility", he said.

Here, he singled out the economy, education and state capacity as priorities. In practice this meant speeding up land reform, reviewing the regulatory environment for small businesses, and expanding public employment programmes.


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