The impact of the recession on non-interest spending

A central goal of the National Treasury is to make sure that non-interest spending remains higher than total expenditure. The intention is to direct more funds away from payment of debt. The recession has however placed a significant strain on the tax revenue. The chart below shows that between 2007 and 2009 government managed to ensure that non-interest spending grew faster than total expenditure. In other words, as a country we were able to grow spending on service delivery quicker than debt service costs. Since 2010 the picture has changed, with total expenditure (which includes debt service costs) growing more quickly. The intention of the National Treasury is clear in the forward estimates. It aims to close the gap between non-interest spending and total expenditure. This is important as it protects spending on service delivery.
[easychart type=”line” height=”300″ width=”350″ title=”% change in total consolidated expenditure and non-interest spending” groupnames=”Total consolidated expenditure, Non-Interest Spending” valuenames=”2007/08,   2008/09,   2009/10,   2010/11,   2011/12,   2012/13,   2013/14″ group1values=”15.2,   17.5,   17.5,   8.4,   9.8,   8.9,   8.8″ group2values=”16.9,   19,   18.7,   7.7,   9.3,   8,   8.2″ ]
(Data Budget Review, Authors Calculations)
In the context of a decline in revenue – even though there has been an increase when viewed against the 2010 estimates – government has increased the deficit. This is consistent with the counter cyclical strategy being followed by government. However, the challenge of protecting non-interest spending growth is vital to delivering services and enhancing opportunities, especially for the poor.

What will happen to the R 9 billion job creation fund?

2011 Budget Options

This article previews the budget looking at three options for spending the R 9 billion for job creation activities announced in the State of the Nation Address.
President Jacob Zuma left the details of the R 9 billion for job creation activities vague in his State of the Nation Address, simply saying:

We are pleased to announce the establishment of a jobs fund of 9 billion rand over the next three years to finance new job-creation initiatives.

The announcement on the details of this are eagerly anticipated when Minister Pravin  Gordhan delivers the 2011/12 Budget Speech. There are three major readings about what the details of the proposal will mean. The major options are:

  1. Application based fund
  2. Subsidy to support youth employment
  3. Support small business

Continue reading “What will happen to the R 9 billion job creation fund?”

Taxes to support entrepreneurship

Proposals on a major reform for small business taxes have been around for years. In this preview, we explore some of the options that potentially features in Budget 2011.

Photo: Rodger Bosch- Workers processing peppers on the production line of a food processing company near Port Elizabeth. Read more:

Proposal to utilise taxes to support small business and entrepreneurship are a strong possibility to feature in Budget 2011.
Minister Pravin Gordhan, in his 2010 Budget Speech indicated that small business taxation would be an area of focus in government. Work in this area has been undertaken, and government might be ready to offer significant tax incentives to small business and start-ups.The logic is important to understand – more employers = more jobs.  The result is that economic participation and inclusion is supported.

Continue reading “Taxes to support entrepreneurship”

Pravin vs. Trevor – The Battle of the Word Clouds

Word clouds provide an intuitive way to initially understand the emphasis in a text. We started with the State of the Nation. Here we compare the word clouds of Minister Trevor Manuel’s last budget speech in 2009, with that of the first speech by Minister Pravin Gordhan in 2010.

2009 Budget Speech

The word cloud below is from the 2009 Budget Speech by Trevor Manuel.

2009 Budget Speech Word Clod
Talkative Trevor?

2010 Budget Speech

2010 Budget Speech Word CloudWhat it means?

Whilst word clouds are fun to do, they do tell us a little about the priorities, including that:

  • Employment and people features more strongly in the 2010 budget speech
  • Growth and development feature prominently in both speeches

I will do a word cloud on Budget 2011 after the budget speech.
With a nod to Wordle. Each speech is focussed on the top 150 words, and I have tried to remove all common words or words used in passing.

Zuma's Inadequate and Incomplete Jobs Package

The expanded definition of unemployment is  35,8% according to Quarterly Labour Force Survey (4th Quarter, 2010). It helps to say that a little more slowly, due to the gravity of the statistic. 3,5 out of every 10 economically active people are unemployed. Dig a little deeper, and the number of people is 7,3 million. President Jacob Zuma and South Africa’s citizens recognise it as national crises.  In this context, everyone wildly cheers as President Jacob Zuma expresses our hopes of higher unemployment in declaring 2011, the year of the job. This sense of crises however may leave us praising anything that supports job creation. Instead, as argued in this article, the Jobs Package is a useful start, but ultimately inadequate and incomplete.

Will more factories be created? Cape Town, Western Cape province: Factory floor of Hip Hop, a successful fashion label in the city centre. Photo: Rodger Bosch Read more:

Before explaining what is meant by inadequate and incomplete, it helps to reflect on possible criticism to this article. Those asking us to line up behind the Jobs Package, will remind us that:

  • You have to start somewhere
  • The state’s ambition must be matched with it’s capacity
  • President Zuma is placing small business on the agenda

Each of these arguments are valid, and provide a mixture of common sense and place emphasise on “getting behind the programme”. There is however an uncomfortable truth, when measured against the scale of the problem the Jobs Package is miniscule for three related reasons.
Acknowledgement: Photo courtesy of Media Club South Africa.

  1. Biased to the formal sector. Based on research by the Department of Trade and Industry [PDF Link],  one can extrapolate that the majority of business owners are black, but overwhelmingly in the informal sector.  The dominance of black business in the informal sector is potentially the strategic entry point to broadening black participation in the economy. The Presidential Jobs Programme however does not address this reality. After all, to access the majority of the programmes a company needs to be registered. The only reference to informal business are proposals related to the merging of Khula, the SA Micro-Finance Apex Fund and the IDC’s small business funding into a single unit.
  2. Links between economic and social policy are weak, especially for the young and unemployed. President Jacob Zuma argues that “insert quote on developmental state”. Evaluations of social grants show increases in the job search activity and attendance at schools. The links that currently exist would however be amplified if there was a social security system that provided support to the never employed.
  3. Incremental programmes will result in incremental results. The programmes outlined by the President are important in themselves as experiments in public policy interventions. However, the programmes do not support rapid changes to the structure of the economy. They are too small to have the desired long-term impact. As a society, we must be finding ways of running experiments at scale more quickly.

The silver lining is that President Jacob Zuma has emphasised the small business sector. This policy stance is a significant political commitment. It could be the start of what the ex-Brazilian Planning Minister Roberto Mangeibera Unger has called in an interview the “decentralised alliance between government and the little guy”.
Taken together, what we are calling the Jobs Package is inadequate and incomplete. We could dodge the question by calling it a useful start, but we will not do that. In the current conjuncture, government can do more, and we can do more as citizens. Zapreneur will hopefully be one platform amongst a multitude of platforms that helps us to see the way. Zapreneur succeeds not because it will provide the best analysis of South Africa, but because we contribute to changing South Africa.
Join us as we move from criticism to creating public policy alternatives.

Zuma's Word Clouds

Politicians have a way with words, usually long speeches without much substance. What would happen if we could cut through the words, and visualise what it means? Word clouds provide a way to do just that (and a bit fun distraction that helps to understand the speech). Below are “word clouds” comparing the 2010 and 2011 State of the Nation Address by Jacob Zuma.

2010 -Jacob Zuma  Word Cloud

Jacob Zuma’s Word Cloud 2010

2011 – Jacob Zuma Word Cloud Version One

2011 Jacob Zuma Word Cloud
Jacob Zuma’s 2011 Word Cloud

2011- Jacob Zuma Word Cloud Version Two

(Editor’s Note – This is an update to the previous post).
Garson Subramoney at Erasibo has produced a revised word cloud version of Jacob Zuma’s Speech. He has taken out words such as honourable and government. It is an improvement, and the image is below. Notice how “work” stands out even more.

Erasibo Version
Taking out unnecessary words in the State of the Nation

What its means?

The word clouds suggest a very strong focus on “work”, “job” and government” have become more prominent in 2011. “Continue” also features prominently in the Erasibo version.
The word clouds were created on Wordle. Wordle describes its service as:

Wordle is a toy for generating “word clouds” from text that you provide. The clouds give greater prominence to words that appear more frequently in the source text.

Zuma’s Vision Test

President Jacob Zuma should surprise South Africans by launching the vision to guide long-term planning and employment creation in South Africa.
The South African Reconciliation Barometer provides a picture of South Africa getting to grips with its past and imagining its future. An important result from the survey is that South Africans view socioeconomic inequality and political party membership as the biggest sources of social division in the country in 2010.

President Zuma ponders the choices
President Zuma ponders the choices Source: GCIS and Bua News

The confluence between socioeconomic inequality and political party membership as sources of social division are important, especially for the African National Congress (ANC). The ANC prides itself on leading South Africa, not just its membership, to create a non-racial, non-sexist, democratic and prosperous South Africa. The survey results suggest that the ANC is failing on both uniting South Africans behind it, and undertaking a programme that leads – in the parlance of the ANC – to a national democratic society. This suggestion finds affirmation in the self-evaluations of the ANC at its National General Council.
Can President Zuma deliver on the vision mandate?

Now, buried in the Strategic Plan for the Presidency (see picture alongside), the National Planning Commission has as a target to develop a vision and national strategic plan during 2010/11. Time is ticking to produce at least the vision within this timeframe, and Minister of Planning, Trevor Manuel would be keen to show progress in this regard.  More importantly, the State of the Nation Address (SON) would be the perfect platform to start discussion on defining the vision for South Africa, especially on job creation. Zapreneur hopes that the National Planning Commission (NPC) would have done enough work to give a first draft of this vision. Unveiling the draft vision would be a welcome development during this year’s SON.
Zapreneur hopes that President Jacob Zuma unveils a vision statement, and one supported by the National Planning Commission. The first test of such a vision would be whether it closes the division in our society sharply divided by inequality and increasingly by political party affiliations. The second test would be the ability of the government to build support in our increasingly noisy democracy. Ultimately, the test will be to implement the vision, and even a draft vision should be answering questions of implementation.
Let us hope we do not have yet another procession of the President reporting on Key Performance Indicators, and covering the administration in glory. Will President Zuma step up to the plate?