Foreword

Since the dawn of democracy just over 20 years ago, government has financed a massive expansion of services to all South Africans, with a focus on the poor. We have done so in a sustainable way, ensuring that our public finances remained healthy so that we could continue building the society envisioned in our Constitution.

Today, we are at a turning point. The world economic recovery remains shallow and structural challenges in our economy have contributed to weak economic growth. This has serious consequences for tax revenue, and our ability to continue funding social and economic programmes.

This year we anticipate GDP growth of 1.4 per cent. While growth is expected to reach 3 per cent in 2017, this is well below the country’s potential and has placed the public finances under increasing pressure. Rising debt levels, if left unchecked, would absorb more and more of our spending. The end result would be less money to spend on improving the lives of our people.

The 2014 Medium Term Budget Policy Statement provides a roadmap to safeguard the public finances. In response to a worsening debt outlook, government proposes a fiscal package that reduces the expenditure ceiling and raises tax revenue over the next two years. This will reduce the budget deficit and stabilise debt, which is now set to reach R2.4 trillion in 2017/18.

Two years of fiscal consolidation will put the public finances on a sustainable footing. We will also approach budgeting with a greater focus on long-term expenditure planning and alignment with government’s policy objectives.

In considering these proposals, we must emphasise that restraining expenditure growth will not compromise front-line services. National, provincial and local government will need to continue identifying savings and improving the way they spend money. Key social programmes will be protected. Government will continue to roll out its capital investment programme. We will encourage private-sector participation in infrastructure delivery.

While expenditure ceilings are being reduced, the budget will continue to grow in real terms. Government will spend R4.4 trillion over the next three years. Allocation of these funds will be in line with the medium-term strategic framework, which gives expression to the National Development Plan.

I would like to thank the President and all of my Cabinet colleagues for their contributions to shaping the proposals before us, as well as the Ministers’ Committee on the Budget, which has brought tremendous insight into the process. I would also like to acknowledge the officials of the National Treasury, who are working with their colleagues across government to ensure that our public finances remain sound.

The choice we face in considering these proposals is a difficult one. But we believe that this course can no longer be postponed.

Nhlanhla Musa Nene
Minister of Finance