16 Mar 1998

16 March 1998


Finance minister, Trevor Manuel, last week unveiled the 1998 budget
which as the first part of a three-year spending plan (the MTEF), outlines
the expenditure framework which will take South Africa into the 21st

The budget sets ambitious goals for continuing the transformation of
South African society. More than 60 per cent of expenditure goes to social
services, including health, welfare and housing.

This budget provides comfort to all sectors of the population. Lower
and middle-income tax payers will benefit from lower taxes, while the unemployed
will benefit from the creation of the Umsobomvu Fund. This R1 billion trust
for job creation, will be financed by a 2.5 per cent windfall tax on the
money distributed to policy holders of Sanlam and Old Mutual when they

Economic background to the Budget

  • The economy grew by 1.5 per cent during 1997/1998. Although a modest
    growth rate, when one looks at it alongside the collapse of the emerging
    South East Asian economies, and the resulting turbulence in economies all
    over the world, this figure shows the strength of the South African economy
  • Consumer price inflation was 8.6 per cent and is expected to fall two
    percentage points in the next year
  • Productivity per worker has increased dramatically in recent years,
    reaching an increase of 4.1 per cent by the end of 1997
  • Manufacturing showed major growth in 1997 with an increase of 3 per
    cent in the contribution of this sector to Gross Domestic product
  • Exports increased by 5.3 per cent in 1997. The contribution of exports
    to GDP has increased from 27.6 per cent to 32.8 per cent since the ANC
    has been in power
  • The budget deficit for 1997/98 was 4.3 per cent, compared with 5.1
    per cent in 1996/97
  • The target for the coming year is 3.5percent, compared with 10.2 per
    cent in the last year of the NP government.

The New Medium Term Expenditure Framework

In the budget speech, Minister Manuel outlined the MTEF. This, for the
first time, looks at expenditure over the medium term. By looking at the
budget over a three year period, government agencies will be able to plan
ahead, which will improve value for money and deliver more and better services.
It will also strengthen the political decision making in the budget process,
and allow government to make concrete choices about the services it seeks
to provide. It will provide for better service delivery, sustained planning
and will allow departments to plan with the knowledge of what they will
receive in the future. The MTEF will strengthen cooperative governance
and decision making.

Key Features of the Budget


Receives a healthy increase from 20.2 billion to 25.1 billion,
an increase of 25%. By 2000/2001 this figure will increase to R28.1 billion.
The budget includes allocations for a hospital rehabilitation programme,
which will help to maintain our public hospitals and community health centres.


Expenditure on welfare services and social grants will increase
to R19.8 billion from R18.4 billion in 1998/99 to R22.2 billion in 2000/2001.
With the significant progress that has been made in eliminating welfare
fraud, this increase will ensure that many more of the needy receive assistance.


The housing budget for 1998/99 is R3.6 Billion. This is lower than
last year because the funds for certain infrastructure projects are now
allocated to the department of Constitutional development. Housing subsidy
grants reached R300 million a month in 1997/98 and this is expected to
increase in the coming year. More that 385 000 houses have been built or
are under construction and 700 000 subsidies have been reserved, with these
projects in various stages of development.


Education gets a huge R5 billion increase to R45 billion which
will further increase to over R50 billion by 2000/2001, proving the government`s
commitment to human resource development.

Land Redistribution and Land Reform

Spending on land distribution and land reform in the coming year
will be R685 million, increasing to R967 by the end of the three year cycle.

Safety and Security

Government plans to increase spending on justice, police and prisons
by about 7.8% per year over the MTEF period. An increased role is envisaged
for the armed forces over the MTEF period.


While the budget for Water Affairs has not undergone a significant
change for 1998/99, the RDP water and sanitation programme is well under
way. 1.2 million people have access to water for the first time and 1020
projects which will bring water to 8.9 million people are completed or
are in progress.

Income Tax Relief

Last year 2.8 Billion was put back into the pockets of taxpayers
by reducing taxes. This year a further R3.7billion tax reduction proves
the government`s commitment to lowering personal taxes. Someone earning
R20 000 will save R300 per year and someone earning R60 000 will save R1

Improved Tax Collection

Through more efficient tax -collection, SARS was able to collect
an additional R2.5 billion last year through greater efficiency. This year
yet a further R2 Billion rand will be collected.

With this budget, the ANC again proves its ability to manage the finances
of our nation, bringing about transformation while maintaining fiscal discipline.
Only the ANC has the ability to advance the economic opportunities not
just of the few but of the many.