In the midst of a slowing global - and local - economy, the government will not increase spending over the next three years beyond what was set in the February budget.
As a result, state spending growth in real terms is limited to 2.9% a year over the next three years, said finance minister Pravin Gordhan, delivering the mid-term budget speech in Parliament this afternoon.
The government will spend R967.5 billion this year, a 9% increase on the 2011/12 outcome, and 48% has already been spent. Total projected revenue for this year is R901 billion - a 7.6% improvement on last year.
In February, Gordhan said in the three years ahead, approved and budgeted infrastructure plans amounted to R845 billion, of which just under R300 billion is in the energy sector and R262 billion in transport and logistics projects.
Strict measures
However, Gordhan cautioned there is a need to reinforce expenditure discipline, and departments have been instructed to prepare spending plans for 2013 within their existing baselines. "New activities have to be funded through savings, reprioritisation and reducing waste."
Strong measures are being taken to ensure value for money in public spending, including more effective controls over personnel expenditure, said Gordhan. "We have again put every effort into finding savings, eliminating waste and reprioritising spending towards key social and development objectives."
Rigorous procurement reforms are being planned across the whole of government, especially in infrastructure project management, to strengthen service delivery, eliminate waste and root out corruption. Treasury is establishing a chief procurement officer and key appointments will be announced shortly.
Over the medium-term expenditure framework period, R40 billion in spending has been reprioritised, said Gordhan. Further shifts in the composition of expenditure are being made towards infrastructure investment, economic competitiveness, education and healthcare.
Not all gloom
Gordhan said the global economy, especially developed countries, will be in difficulty for some time to come. "The global economy is slowing down. Recovery after deep recessions takes several years. The European situation does not inspire confidence."
Global growth is predicted to be 3.3%, according to the International Monetary Fund, said Gordhan. He noted economic growth in developed countries will remain below 1.5% this year and the next, while developing countries will grow at between 5% and 6%.
Economic activity in the euro area, which is SA's most important export destination, is expected to contract by 0.4% this year and grow just 0.2% in 2013, said Gordhan. Growth has also slowed in China and India. "This has affected the South African economy through lower commodity prices and slower growth in trade."
South Africa is only expected to reach a 2.5% gain in gross domestic product this year, although this should rise to 3% next year, and 4.1% in 2015 as the global economy recovers.
In February, Gordhan said SA's economic growth would be about 2.7% this year, down from last year's estimation of 3.1% for 2012.
"As South Africans, we need to dig deep into our reservoir of goodwill, ingenuity and resilience to find new ways of implementing our plans, creating jobs and generating inclusive growth."
However, while SA faces difficulties, it is not in terminal crisis, said Gordhan.
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