Inter Press Service - October 29, 2002
Anthony Stoppard

"Poverty reduction remains the over-arching goal of government policy. Education, health services, welfare, social security and other social services account for 57.5 percent of consolidated non-interest spending, and will remain our first priority in the years ahead," said the South African Minister of Finance, Trevor Manuel.

The South African government has budgeted for expenditure of R291.8 billion rand this year.

One U.S. dollar is equal to 10.10 Rand.

Manuel was presenting South Africa's Medium Term Budget Policy Statement (MTBPS), which sets out government's broad spending and economic plans for the next three years in Parliament on Tuesday.

At a time when increases in food prices have left more and more South Africans threatened by hunger, Manuel announced the creation of a R400 million a year fund to provide emergency food aid to those in need. "South Africa does not face the critical food shortages that confront several other countries in our region, but nonetheless rising food prices this year have threatened the livelihoods of vulnerable households," he explained.

Manuel says the government expects food price inflation - largely driven by the rapid depreciation of the local currency, the rand, on international markets -- to moderate over the next year. However, he added that Cabinet plans to keep a close watch on food prices.

He also announced that government spending on the fight against HIV and AIDS will increase by about R3.3-billion over the next three years. "Additional funds will go towards the roll-out of the prevention of mother-to-child transmission, post-exposure prophylaxis, and further expansion of appropriate treatment regimes. A technical committee is currently reviewing options, costs and affordability to take forward the Cabinet decision," he said.

Prophylaxis is anti-AIDS drug treatment.

In many ways, the financial commitment to providing the anti-AIDS drugs -- anti-retrovirals -- in the public health service sets to rest the controversy around South African President, Thabo Mbeki's questioning of the effectiveness of the medication.

While cautiously welcoming the budget, Congress of South African Trade Unions (COSATU) spokesperson, Vukani Mde, said: "We are concerned that the MTBPS does not initiate the shift in social and economic policies that is required to end poverty and bring about sustainable growth. We have long called for the introduction of policies targeted more toward employment creation and toward ensuring greater spending on poor communities."

According to COSATU, at least 22 million people in South Africa live in abject poverty and on average survive of R144 per person, per month.

COSATU has been a vociferous critic of government's refusal to open the national treasury and substantially increase spending on social and economic development programmes.

Ironically, the South African Chamber of Business also called on the government to do more to create an economic environment in which jobs could be produced - because additional spending on social services and grants were not sustainable.

As expected, Manuel was relatively upbeat about South Africa's economic prospects for the next few years. He says that despite a poor outlook for the international economy, South Africa's is expected to grow by 2.6 percent this year -- and by an average of 3.5 percent over the next three years.

Much of this growth is expected to be driven by exports, which are booming because of the low value of the rand.

Ironically, the depreciation of the rand on international markets is also the cause of South Africa's higher than expected inflation rate - expected to average 10 percent this year.

Manuel also cleared the way for South African companies to invest in Africa. South Africa makes-up close to 70 percent of the gross domestic product (GDP) of the 14-nation Southern African Development Community (SADC) and is one of the largest, most industrialised countries on the continent.

"Although our financial and trade links are global in their reach, growth has been especially rapid in our engagement with the rest of the African continent. The continuation of this trend is a critical success factor for the New Partnership for Africa's Development (NEPAD). And it is for this reason that the next steps in exchange control liberalisation will be focused on promoting expanded investment in Africa," said Manuel.

NEPAD is a programme to kick-start the social and economic development of Africa and is being driven by Mbeki, among other African leaders.

Manuel announced that South African companies could use R2 billion of their domestic funds to finance new approved direct investment in Africa -- up from R750 million.(END/IPS/AF/IF/AS/MN/02)

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