Manuel defends inflation targeting, but opens door to Alliance positions

By: Terence Creamer

Published: 21 Oct 08 - 17:00

Finance Minister Trevor Manuel strongly defended government's inflation-targeting policy on Tuesday, saying it provided a vital anchor in the context of financial market turmoil.

His remarks, which were made together with the release of the Medium Term Budget Policy Statement (MTBPS), followed only days after the ruling African National Congress' alliance partners met at an economic-policy summit, during which inflation targeting came in for some heavy criticism.

In his address to the National Assembly, Manuel argued that the moderation of inflation "must remain a central policy objective, particularly as we seek to expand investment and job creation under conditions of heightened business uncertainty".

Public service to receive huge wage boost

Wyndham Hartley

Parliamentary Editor

CAPE TOWN — The higher than budgeted public service salary increases will cost the provinces R3bn this year and will add a huge R23,2bn to the salary bill over the next three years, the medium-term budget policy statement revealed yesterday.

Not only were the provinces affected by the higher than anticipated increases, but every government department — particularly those with large staff components such as defence and the South African Police Service (SAPS) — had to have its budget topped up in the additional appropriation to meet these increased personnel costs.

The policy statement said that “at the time of tabling their budgets, provinces were asked to provide for salary adjustments of 7,5% in 2008-09, but actual increases of 10,5% were awarded. An amount of R3bn is included in the 2008-09 adjustments budget and R23,2bn is proposed for the next three years for the carry-through costs of higher salary increases and to provide for additional personnel costs in education and health.”

Defence has been given an extra R202m to cover the higher salary costs this year, while the justice department has been allocated R119m and the SAPS a whopping R668m.

All in all, the current transfers to the provinces will increase this year to R7,6bn, bringing the total allocation to R245,6bn for the current financial year.

This will rise by a further 10,8% each year, bringing the total allocation to provinces in the form of “equitable share” to R333,8bn in 2011-12.