Mandela budget assures poor, lenders

June 23, 1994|By Michael Hill | Michael Hill,Johannesburg Bureau of The Sun

CAPE TOWN, South Africa -- Nelson Mandela's government unveiled its first budget yesterday, a moderate financial blueprint that appears designed to please international lenders as much as the long-oppressed black population.

As expected, the $40 billion plan contains no major efforts to force the country's white elite to pay for the economic ravages visited on the majority black population by apartheid.

It includes only small tax increases and a deficit of 6.6 percent of the gross domestic product -- in line with recommendations from international financial organizations.

The budget seems to be another effort by the African National Congress government to assure the world that, whatever its rhetoric in the days of struggle for liberation, it has no plans to head down a socialist path, but instead puts its faith in economic growth as the engine of social change.

The main program to aid the poor is the previously announced Reconstruction and Development Program, the foundation of the ANC's campaign platform. The $750 million program accounts for about 3 percent of the $40 billion budget.

This money, which will fund housing, health care and other social programs, does not come from additional taxes, but from reductions in allocations to other departments.

Overall, the budget is 10.2 percent higher than last year's. Discounting inflation, this is a real rise of 2.7 percent. The budget assumes that the economy, beginning to come out of a decade-long recession, will grow by 3 percent this year.

The main tax increase is a one-time, 5 percent surcharge on those earning more than $15,000 a year. The levy is to pay the costs of transition to the new government, including running South Africa's first nonracial democratic election.

"Through the grace of God, we have had a wonderful transition," Finance Minister Derek Keys told Parliament in the budget address. "But we incurred costs of [$1.1 billion]. From the point of view of fiscal discipline, this is regrettable."

Though the transition to a new South Africa has been accomplished with great fanfare, in many ways yesterday's budget came out of the old South Africa.

It has been massaged by budget office bureaucrats for the last 18 months and was presented by Mr. Keys, a holdover minister from the apartheid-era government.

And it contains allocations for various apartheid structures, such as the tribal homelands created to deny citizenship to blacks.

Budget officials explained that with the governments of the new provinces still being organized, and local governments not yet elected, the only way to fund localities was to go through the existing apparatus. The money is to be transferred to the provinces when they get their financial houses in order.

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