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South African Mid-Term Budget Faces Severe Shortfall

  • Delia Robertson

South African Mid-Term Budget Faces Severe Shortfall

South African Mid-Term Budget Faces Severe Shortfall

The South African government unveils its mid-term budget Tuesday and it's expected to reflect the effects of the global economic crisis.

Many economists say the mid-term budget faces a huge shortfall in tax revenues.

In Johannesburg, VOA reporter Delia Robertson says, "South Africa has been hit by the recession along with the rest of the world. And so, this time around…the Finance Minister, Pravin Gordhan, is likely to have to report a deficit in revenue collection by…nearly as much as $12 billion."

The outlook is much bleaker than when the budget was first introduced in February.

"I think in February it wasn't quite clear just how deeply the recession was biting South Africa. But that has become abundantly clear in the months since then," she says.

What's causing the shortfall?

"It's got a lot to with a shortfall in revenue collection from businesses. The mining industry is down. The manufacturing sector is down. Motor vehicle production sector is down. So these are all major producers in South Africa," she says.

The projected revenue shortfall could change proposed spending plans of the Zuma administration.

"It makes it extremely difficult for Mr. Zuma and his government to fulfill the promises they made to the electorate in general elections this year. They also have ambitious plans to introduce a national health insurance scheme and other initiatives that will require a lot of money. And it looks like they're going to have to instead curtail their spending," she says.

World Cup preparations appear safe

"Almost all of the work that was planned for the World Cup has already been budgeted. They money's already been allocated. The stadiums are almost all complete and will be complete in time. But that money was already available," she says.

The South African government had already invested in rail and road improvements, as well.

"That work is already very much underway," she says.

Robertson says the projected budgetary problems may not have a large affect on South Africa's already high unemployment rate.

"I think we've already seen the impact," she says, "the fact that jobs have been lost. There are signs of a slowdown in that recession and so…we may have seen the worst of the job losses, but probably until the end of this year we will continue to see more."

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