* Budget deficit to widen a touch more
* Gordhan wants positive budget balance by 2015
* Treasury cuts GDP forecasts
* Spending for investment, moderate in other areas
By Phumza Macanda
JOHANNESBURG, Oct 25 South Africa will see its
budget deficit widen a touch this year and over the next three
to support a weak recovery, but plans are afoot to constrain
expenditure and keep debt in check.
In its medium-term budget policy statement, the National
Treasury said the deficit would be financed mainly through
domestic auctions, with no plans to increase global borrowing
from the $1 billion a year for the next three announced in
Finance Minister Pravin Gordhan said he would like to see a
"positive primary balance" by 2015.
Growth in Africa's largest economy has slowed, putting
revenue under pressure, a scenario that will continue over the
next three years.
The National Treasury cut its growth forecast for the next
three years, seeing GDP growth rising to 4.1 percent in 2013,
compared with 4.4 it forecast in February.
"Current growth rates are not fast enough to support the
employment gains and poverty reduction that the country
requires," it said in its medium-term budget policy statement.
The government has previously said the economy needs to grow
by an average 7 percent a year to make a meaningful dent on
unemployment currently at over 25 percent of the labour force.
With 15.2 million people receiving some kind of government
assistance, social protection is the second biggest expenditure
category after education.
President Jacob Zuma's government has to reduce poverty to
take the pressure off state coffers and ensure social stability
in Africa's largest economy.
Finance Minister Pravin Gordhan plans to direct more funds
towards investment and moderate spending in other categories. He
is worried about the government's wage bill, the fastest-growing
component of expenditure over the past decade.
"Wage settlements need to be balanced against social and
economic priorities. Moderation in the growth of the wage bill
will see compensation as a proportion of non-interest spending
decline of the (medium term)" the Treasury said.
To avert a strike, the government settled with workers on a
6.8 percent wage rise, far above the rate of inflation which was
at 5.7 percent year-on-year in September.
It said for it had budgeted state wage settlement of five
After two years of surpluses prior to 2009's recession,
South Africa's budget swung back into deficit.
Gordhan said he wanted to moderate spending growth and
increase revenue intake over the next three years, stabilising
"This means by 2014/15, we can begin to rebuild fiscal
space, with a positive primary balance, or revenue broadly in
line with non-interest spending," Gordhan said.
For this financial year, the Treasury will raise its
borrowing requirement to 166.6 billion rand this year from 157.9
billion forecast in February, to plug the budget gap.
Gordhan has previously said it would take between three and
four years for revenue to recovery to pre-recession levels.
"Should the economy fail to recover as predicted, ensuring
long term fiscal sustainability would require a combination of
slower spending growth and policy measures to raise tax
revenue," the Treasury said, not clarifying whether personal
income tax could rise.
Net loan debt as a percentage of GDP is seen at 33.8 in the
current financial and is seen rising to 39.7 percent by 2015.