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Nene presents muted budget

Nicola Mawson
By Nicola Mawson, Contributor.
Johannesburg, 25 Feb 2015
Finance minister Nhlanhla Nene notes government has limited resources at its disposal.
Finance minister Nhlanhla Nene notes government has limited resources at its disposal.

Budget 2015: Finance minister Nhlanhla Nene presented a bleak outlook for South Africa in this afternoon's budget, as he grapples with a revenue deficit and the need to spend money where it will get the most value.

Presiding over his first full budget in Parliament, Nene touched on issues such as education, infrastructure, health and the state of the economy. Figures released yesterday showed SA's gross domestic product gained 4.1% quarter-on-quarter, but only 1.3% year-on-year.

Nene noted the economic outlook had worsened, and government has now trimmed its gross domestic product growth rate from 2.5% (in October last year) to 2% for 2015. Economic growth is being bogged down by structural and competitiveness challenges that hold back production and investment, and the security and reliability of energy supply, he said.

"Higher growth is possible, if we make good progress in responding to the electricity challenge or if export performance is stronger. The best short-term prospects for faster growth lie in less energy-intensive sectors such as tourism, agriculture, light manufacturing and housing construction. These are also sectors that employ more people, and so they contribute to more inclusive growth. Efforts to support these sectors have to be intensified."

Nene also noted revenue collection is lower than where it should be, despite efforts by the South African Revenue Services to bring in more tax. As a result, this year's budget includes an increase in taxes amounting to R17 billion, which will be effected through petrol increases, more personal tax for higher income earners, increased sin tax, and more expensive fuel.

ICT not a priority

With the bulk of his speech focusing on the challenges facing the country, and the need to create jobs and stimulate gross domestic product growth, Nene only made a few references to ICT, confirming analysts' expectations that this would take a back seat.

Nene noted the country will spend R1.1 billion on SA Connect, its aim to provide ubiquitous broadband by 2020, and also referred to the R2.1 billion the Square Kilometre Array will cost over the next three years.

However, his speech - and supporting documents - failed to make mention of Telkom's lead role in a broadband project that will see networks rolled out in eight municipalities, at a reported cost of R98 billion.

Nene also failed to assuage analysts' expectations that he will deal with the issue of the stalled digital migration project, which is holding up the availability of more spectrum that can be used to expand broadband in rural areas.

In addition, he did not decrease taxes on PC components, which would put devices in many more hands, and stimulate the local manufacturing sector.

Nene did, however, tackle governance issues by announcing the deployment of a central supplier database and the launch of an e-tender facility, which is meant to eliminate red tape and cut out the fraud that plagues government supply chains.

The database, he said, would interface directly with institutions such as government payroll to make sure no state staff are tendering for deals.

"This has been a challenging budget to prepare, under difficult economic circumstances. The resources at our disposal are limited. Our economic growth initiatives have to be intensified," said Nene.

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