Government Spells Out Five-Year Plan in South Africa

This framework, based on the African National Congress (ANC)'s election manifesto, will guide the government's programme of action over the next five years, with a core element the government's commitment to halve unemployment by 2014, from the levels of 2004.

Background

Trevor Manuel, the previous finance minister, was appointed minister in the new portfolio Planning Commission by the newly elected president, Jacob Zuma. Some uncertainty and speculation surrounded the mandate of the new ministry. With the unveiling of the MTSF, Manuel spelled out the commission's role as providing a "guide to planning and resource allocation across all sphere's of government. It will inform the core elements of the budgetary submissions that national departments make to the government's budgeting process, through the Medium Term Expenditure Committee." Municipalities and provinces will thus have to take the priorities stated in the MTSF into account in their planning and spending processes. The MTSF spans a five-year period but will be reviewed annually to incorporate changing economic realties. Manuel added that "while the MTSF reflects medium-term objectives, the seven clusters of government are finalizing their contribution into a detailed Programme of Action, translating MTSF imperatives into a six-month government action plan, which will start in January 2010."

Core Objectives

The MTSF spells out 10 strategic core objectives:

1. Ensuring more inclusive economic growth, decent work, and sustainable livelihoods: Facilitating a sustainable growth path through sound macroeconomic policies will provide conditions for higher rates of investment and creation of decent jobs.
2. Economic and social infrastructure: The government is committed to infrastructural development and spending to achieve the target of a fixed investment ratio of 25% as a ratio of GDP by 2014.
3. Rural development, food security, and land reform: The main objective is to develop a comprehensive strategy to alleviate poverty in rural areas. Measures to ensure that emerging farmers have the means to succeed and that land is used productively will be implemented.
4. Access to quality education: The education system will focus on quality outcomes by improving early childhood development, improving schools management, and supporting and developing a high-quality teaching profession.
5. Improved healthcare: This will include the phasing in of a National Health Insurance system over the next five years and introducing measures to improve the quality of management in this sector.
6. Fighting crime and corruption: The government will focus on organised crime and corruption.
7. Cohesive and sustainable communities: The government aims to meet the target of halving poverty and unemployment by 2014.
8. Creation of a better Africa and a better world: Regional integration stays high on the priority list.
9. Sustainable resource management and use: The government will focus on climate change by looking into renewable energy alternatives, supporting local and sustainable food production, and promoting sustainable water use.
10. A developmental state including improvement of public services: The government will focus on improving service delivery by all spheres of the state.

Outlook and Implications

The MTSF follows from the State of the Nation address by President Zuma, and although it holds nothing new it serves as a clear statement of intent by the government and a guide on spending priorities. As such it will also serve to hold departments accountable for spending decisions and thus help to improve efficiency and productivity (see South Africa: 4 June 2009: South African President Sets Ambitious Jobs Target in Maiden Policy Address). The government's re-commitment to infrastructural development is not only necessary in this stage of the economic cycle as it will serve as buffer against the slowdown, but will also help to elevate economic growth to a more sustainable level. According to IHS Global Insight's calculations, the investment target of 25% of GDP by 2014 is attainable should the government and private sector collaborate to keep up investment spending. Private-sector investment spending will, however, need to improve from the current low levels. To facilitate this, the government will have to ensure an enabling economic environment of stability, low costs, and confidence. In this regard, the government's commitment to a low and stable price environment through inflation targeting is encouraging (Manuel reaffirmed the South African Reserve Bank's mandate on inflation targeting in the press interview). The target of halving unemployment by 2014, however, seems ambitious. This will require more than the government's Expanded Public Works Programme. A concerted effort and political will to change the employment elasticity of the South African economy will be needed. Highly unionised labour will only complicate matters (see South Africa: 14 July 2009: End in Sight for South Africa's Construction Strike). The current state of the economy will also complicate the implementation of all these priorities as the government has already admitted that revenue is expected to fall significantly short of budget—raising the budget deficit as a percentage of GDP to well above the budgeted 3.9% as a share of GDP (see South Africa: 2 July 2009: Fiscal Deficit to Widen on Tax Shortfall in South Africa).