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S. Africa to spend more to help poor

Associated Press / February 24, 2011

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JOHANNESBURG — South Africa will spend more to help the poor, while offering tax relief and other probusiness steps in a country where nearly a quarter of the population is unemployed, the finance minister said yesterday.

In presenting the budget of Africa’s most important economy to Parliament in Cape Town, Pravin Gordhan said he was following up on pledges President Jacob Zuma made to focus on fighting poverty and creating jobs.

Overall, spending for 2011-12 was up 9.8 percent from the 2010-11 budget. The largest share of spending, some 20 percent, was on education, compared to about 3 percent on defense.

The pledges to increase assistance come amid criticism that Zuma’s government has not done enough to overturn the deep economic divide created by apartheid.

Gordhan, who opened the speech with a casual “Cheers,’’ outlined plans to spend more on housing, schools, health, developing rural areas, student aid, and welfare for the elderly, disabled, and for children.

Small businesses, seen as a potential engine of growth and job creation, would get tax breaks. Increased spending on roads and other infrastructure would also help business, Gordhan said.

On the revenue side, Gordhan proposed tax increases on gambling winnings, alcohol, tobacco, some new cars, fuel, and airline tickets.

Electricity rates also were to go up. Still, the budget deficit was projected at about 5 percent of GDP.

Acknowledging the huge size of the task amid a global recession and in a country where a quarter of the work force is unemployed, Gordhan said: “Building South Africa is a multidecade project.’’

He paraphrased the title of former President Nelson Mandela’s autobiography, “Long Walk to Freedom,’’ by saying, “We have embarked on a long walk to economic freedom. All South Africans aspire to these freedoms.’’

Part of the government’s plan was announced a day earlier by the government’s Industrial Development Corporation, which said it would spend about $1.4 billion over the next five years on low-interest loans to businesses seen as having the potential to grow and create jobs.

The government promised last year to create 5 million jobs over the next decade. Gordhan has estimated that would require growth of over 6 percent a year.

The economy grew 4.4 percent in the fourth quarter, and unemployment shrunk slightly from 25.3 percent to 24 percent. Some of the nation’s economic gains were credited to its hosting of the 2010 World Cup soccer tournament, but experts have said they fear the advances may not stick.

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