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Gordhan delivers 2013 SA's mid-term budget speech

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South African government will meet its budget deficit target of 4.2 percent this year, or down R144.6bn in the 2013-14 fiscal year, and limit spending over the medium term, Finance Minister Pravin Gordhan announced.

The budget deficit, the difference between revenue and spending, is seen at 4.2% of gross domestic product (GDP), or down R144.6bn, in the 2013-14 fiscal year, a surprise downward revision from the deficit of 4.6% projected in February.

In his 2013 Medium-Term Budget Policy Statement (MTBPS), tabled in Parliament, he said a spending limit had been set for 2016/17, holding real non-interest expenditure growth to an annual average of 2.2 percent over the three-year spending period.

Spending on key social and economic programmes would be maintained. Net national debt was projected to stabilise, at 44 percent of GDP, four years from now, in 2017/18, he said.

Gordhan announced severe cuts to office bearers’ perks across all spheres of government as well as for executives of state-owned enterprises.

A Treasury official confirmed that the cost-cutting was approved by the Cabinet, the government’s highest decision-making body, on Wednesday, just hours before Mr Gordhan was to present his medium-term budget policy statement to both houses of Parliament.

The cost-cutting measures have been made with just more than seven months to go until the next national and provincial elections.

The state would impose tighter guidelines on cars, accommodation and travel for all government leaders, from ministers to mayors.

Gordhan said these would apply from December 1, and would spell an end to official credit cards, million-rand vehicles, luxury hotel stays and expensive home upgrades for Cabinet members.

Distribution of resources would be in line with the National Development Plan. Health and education would continue to receive the largest allocations, while budgets related to infrastructure, jobs, local government, and community development would grow strongly.

The consolidated framework proposed for the 2014 Budget provided for total spending of R1.24 trillion in 2014/15, R1.34trn in 2015/16, and R1.44trn in 2016/17.

Debt-service costs would rise from R100.5 billion in 2013/14, to R135.4bn in 2016/17.

Medium-term spending pressures had been accommodated by re-prioritising allocations and drawing down the contingency reserve, Gordhan said.

Provinces would receive additional funding for their salary requirements, while the share of nationally generated revenue going to local government would continue to grow strongly.

"The budget policy framework for the next three years is designed to manage risk in a constrained fiscal environment, while building a foundation for faster and more inclusive long-term growth," he said.

GDP growth of 2.1 percent was expected in 2013, rising to 3.5 percent in 2016.

The expenditure ceiling set out in the 2013 Budget forward estimates would be maintained for the period ahead, and the budget deficit would narrow from 4.2 percent in the current year to 3.0 percent in 2016/17.

Measures to support faster growth included investing in electricity and transport capacity, promoting industrial competitiveness, and broad social co-operation to address problems in mining and community development.

State-owned companies would continue to borrow to finance capital investment.

"Government works with these companies to ensure they can borrow at reasonable cost while increasing their efficiency. Over the period ahead, state corporations are not expected to be funded from the fiscus," Gordhan said.