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South Africa presents cautious budget despite elections

Published on 26/02/2014

South Africa's government presented a restrained budget on Wednesday which largely sticks to existing spending limits even though voters are clamouring for election-year spending.

The state of South African public finances is under the spotlight of credit ratings agencies, however.

“Our present circumstances oblige us to live and spend modestly and keep a careful balance between social expenditure and support for growth,” finance minister Pravin Gordhan told parliament.

Africa’s powerhouse economy is expected to grow by a slower than projected 2.7 percent this year, Gordhan said.

And although the budget deficit was lower than expected at 4.0 percent last year — as also forecast for this year — Gordhan resisted calls to increase social spending sharply ahead of elections on May 7.

The ruling ANC goes to the polls amid rising frustrations over unemployment and government services with protestors taking to the streets to demand more from the state.

Welfare grants and spending on schools and hospitals retained the lion’s share, but there was but there was little extra money to go round.

“This is a budget in which circumstances dictate that we cannot add resources to the overall spending envelope,” said Gordhan.

Nearly 121 billion rand ($11 billion dollars) was allocated for welfare grants in 2014, against 111 billion rand last year.

Instead Gordhan cranked up the rhetoric.

“We have made immense strides in rebuilding a fragmented society and in opening opportunities to all South Africans,” said Gordhan.

“Yet we still have an immense set of tasks and challenges facing us. We cannot just muddle through the next decade.”

“We have to work together to radically change our economy.”

South Africa this year marks 20 years since the fall of apartheid still mired in massive inequalities.

The country, with Africa’s biggest economy, was downgraded by credit ratings agencies in late 2012 and faces further downgrades if deficits are not brought in line and reforms implemented.

A lower rating usually spells higher borrowing costs on world bond markets.