2012
Prince Masuku
Economics
3/5/2012
2012
Prince Masuku
Economics
3/5/2012

Macro-economic issues role of the public sector
Macro-economic issues role of the public sector

CONTENTS PAGE
Contents Page Introduction… 1
The present situation and a comparison with previous years… 2
The proposal/ initiatives from the State of The Nation Address… 5
Reaction of other political parties… 6 Impact of the President’s proposals on the national budget… 6
How did the budget address these issues?.. 7
Conclusion… 8

INTRODUUCTION
Unemployment occurs when people are without jobs and they have actively sought for work. In South Africa, unemployment is extremely high and it is seen as one of the most pressing socio-political problems facing the government. The has been a lively debate on the extent, nature and cures of unemployment in South Africa but the outcome has rather been inconclusive. Unemployment in South Africa is so widespread that it demands an explanation. Unemployment is potentially a matter of serious concern - for its effects on economic welfare, production, erosion of human capital, social exclusion, crime, and social instability. However, its potential costs depend on the nature of the beast. The question we address is this. Is unemployment in South Africa largely voluntary or involuntary? The answer has important ethical and policy implications. If unemployment is largely voluntary, its cure can be downgraded as a policy concern. Interest groups and ideologues have taken predictable stances but the issue has not been addressed rigorously in South Africa.
Infrastructure is basic physical and organizational structures needed for the operation of a society or enterprise, or the services and facilities necessary for an economy to function. It can be generally defined as the set of interconnected structural elements that provide framework supporting an entire structure of development. South Africa has a modern and well developed infrastructure. The roads are world class, the air and rail networks are the largest in the continent. And the country’s ports provide a natural stopover for shipping to from Europe, the Americas, Asia, Australia and both coasts off Africa.

The present situation and a comparison with previous years.
Real output (GDP) growth deteriorated noticeably in the second half of 2011. In the labour market, employment losses which had been modest during the first months of the year increased after April. Between December 2010 and December 2011, total employment as measured in the household survey decreased by 2.96 million while unemployment for the same period increased by 3.57 million. Total unemployment in December 2011 stood at 11.11 million, its highest level since 1997, and the unemployment rate of 7.2 per cent was the highest since January 1993. Between May and December 2011, the deterioration in labour market performance was especially noticeable. As in past recessions, the increase in unemployment caused an automatic increase in the number of persons filing for and receiving benefits from UIF programs. Recipients of so-called regular UIF benefits (the program that pays benefits up to 26 weeks in nearly all states) increased from 3.1 million in May-June to 4.5 million in December. An added 1.6 million received Extended Unemployment Compensation (EUC) during December. Recipients of regular UIF and EUC represented 55 per cent of the unemployed during the month.

th Unemployment in South Africa
There has been further deterioration in the ageing bulk water infrastructure portfolio as a result of insufficient maintenance and neglect of on-going capital renewal. In general approximately 60% of households receive adequate refuse removal service. In the major urban areas, the percentage is over 80%, while in the rural areas it is as low as 20%.Landfill sites in metros are generally licensed, but not all are well managed. Many other municipalities, especially rural municipalities, have unlicensed landfill sites or licensed sites that are not operated according to acceptable/appropriate standards. The national road network is in the good to excellent range with the proportion of roads in poor to very poor condition never exceeding the international benchmark of 10%. The paved provincial road network has deteriorated significantly over time. Generally, these roads are in satisfactory condition. Less than 10% (except for Buffalo City) of the paved metropolitan roads are in poor to very poor condition. ACSA provides world-class aviation infrastructure at most of its airports. It demonstrates a model of excellent maintenance and operational practice, with first-rate institutional memory. Expenditure on upgrading and providing new port infrastructure owned and operated by Transnet has continued at a steady pace since 2006, with a number of large projects already complete, including the new port, Ngqura. Other ports are ageing but well-maintained. Eskom’s generation infrastructure (95% of South Africa’s generation capacity) is in a satisfactory condition with a reasonable maintenance regime. It can meet current demand. In general, maintenance of education infrastructure in South Africa has been limited, resulting in conditions deteriorating across all provinces. However, there is some variation in school infrastructure condition, with urban and ex-Model C schools being generally better maintained than rural schools.

The focused investment over the past five years has resulted in more new infrastructure and an improvement in the condition of some existing assets. However, infrastructure at municipal level remains poor and is deteriorating in many places. Further, the resilience of all new and previously existing infrastructures is questionable without a much improved commitment to maintenance.

Infrastructure development

The proposals/initiatives from the State of the Nation Address.
The president made it aware that the is a very great need to solve the problem of un employment in the country and he stated that the following might be efficient in relieving this problem: * Government support to struggling industries in order to save jobs e.g. airline industry * Provide more training to the unemployed. This will improve their computer skills and communication therefore they will become more confident and employable * Make more information available in job centres * Reduce unemployment benefits * The government needs to try to create demand in the economy.
The president stated that all that is needed towards infrastructure is that it must be maintained and looked after. The technique to improve the delivery capability of a network is to improve the systems and efficiency of application of limited resources. A systems-based approach will enhance the integration of services and maximise the use of scarce human and infrastructural resources. It will also reduce the incidence of failure as constant data collection on condition allows early identification of acute and chronic weak points in the delivery chain. Neglect is also costly in financial terms - for example, roads maintenance that is delayed for one year could cost three to six times more when there is eventually no choice but to do it. A systems based approach also makes it more difficult for those responsible to avoid doing the necessary work.

Reaction of other political parties
Reaction by opposition parties to the budget speech delivered by Pravin Gordhan before parliament was congenial and generally affable. There’s a lot of wrong with the world at this point, and this is the best response that anyone could have come up with to both shield South Africa and provide a base for better growth.
According to the Democratic Alliance (DA), the infrastructure budget is ambitious enough. The DA said in its statement, “South Africa’s fiscal resilience is highlighted by a decrease in our budget deficit from a forecast 5.2% to 4.6% of GDP. But the fact that the finance minister had the space to do this shows that he could have been bolder on a plan to drive growth and build infrastructure.”
The South African Communist Party in its reaction to the budget. “We welcomed the fact that overall this is not a budget of despair and contraction, but rather a continued commitment to a significant economic and developmental spending. In particular we welcome the strong budgetary support for the massive infrastructure build programme announced in the president’s State of the Nation Address, the significant spending on job creation and support for the manufacturing sector.”
The rest of the other parties felt that this was a good budget and that they wouldn’t change anything drastic to it just a few tweaks here and there.
Impact of the President’s proposals on the national budget. On February 25, 2012, the Congressional Budget Office (CBO) released its full analysis of the president’s budget proposal for fiscal year (FY) 2012, which was published in February. CBO estimates the impact of the president’s policy proposals on federal spending, revenue, deficit and debt, as well as the economic effects of their implementation. According to CBO, enacting all of the proposals contained in the president’s budget would result in cumulative deficits of R9.5 billion between 2012 and 2021. Federal publicly-held debt would rise to 87 per cent of Gross Domestic Product (GDP) by FY 2021 CBO projects that the policies contained in the president’s 2012 budget proposal would result in cumulative deficits that are R2.7 billion greater than deficits under the current law baseline through 2021. Under both the president’s proposal and the current law baseline, total deficits would fall as a share of the economy for several years. CBO projects that the policies proposed in the president’s budget would result in deficits declining to a low of 4.1 per cent of GDP in 2015 before reaching 4.9 per cent of GDP by 2021. While the estimates of the budget effects of the president’s individual proposals do not reflect their potential impact on the economy, CBO does examine the economic effects of the whole set of proposals taken together. Between 2012 and 2016, total output is projected to be between 0.2 and 0.7 percentage points higher than under current law. Much of this increase in output is attributable to the tax reductions contained in the budget, which would increase disposable income and boost consumption. However, after 2016, CBO projects that large and growing deficits would reduce capital stock and labour productivity, reducing output by 0.1 to 1.2 percentage points relative to the baseline between 2017 and 2021.
The areas high in infrastructure
How did the budget address these issues?
The budget reflects the collective determination of the government to address with the challenges of creating jobs, reducing poverty, building infrastructure and expanding our economy. The budget sets out a financial framework that is sound and sustainable. It recognises that building South Africa is a multi-decade project that must invigorate our capacity to grow, and must include all South Africans in that growth. The budget ensures that the government can intensify activities that make a difference to the lives and prospects of all South Africans; that priority programmes required for implementing the New Growth Path are funded. That macroeconomic stability is maintained, with necessary adjustments supporting enterprise and job creation.
In reflecting commitments made in last year’s budget, we can point progress on several fronts. Savings have again been identified in low-priority categories of spending, realising over R30 billion to frontline service delivery allocations. Support for the Industrial Policy Action Plan is further enhanced. Tax and spending measures are proposed to improve investment and trade performance, enhance science and technology, and accelerate job creation, boost small enterprise development and to strengthen rural development and emerging farmer support. Education and skills development are bolstered over the period ahead through expanding further education colleges and student financial assistance, and a new school building programme. The budget is tabling guidelines on a long-term fiscal sustainability and debt management.
An opportunity to create hope for young people. CONCLUSION
I believe that the budget is appropriate considering the fact that a big portion of the budget is geared towards improving and building infrastructure which in turn will provide more employment therefore reducing the unemployment rate in the country, talk about killing two birds with 1 stone. The budget is clear and very transparent so making it easy to understand and follow. I applaud Pravin Gordahn for compiling such a good budget and the fact that he is paving a way for future budgets to follow, because his budget is more focused on long-term development. Unemployment causes many to enter the informal sector.

The building and maintence of the infrastructure of the country