Trevor Manuel's 2009 budget is likely to very different to those he has presented for the last few years, as the local economy suffers and tax revenues reduce. He may, however, still increase government spending, both to counteract the economic slowdown and to meet the expectations of an election-year budget.
To meet South Africa's challenges in the current environment, Frost & Sullivan believes that there are a few crucial areas that Manuel needs to target. Energy, water infrastructure, information and communication technologies (ICT) and healthcare must benefit from more efficient government support.
While Manuel does not need to announce any new contributions to Eskom's expansion programme, Frost & Sullivan would like to see the minister deliver a very clear message that government will honour any of the utility's debts.
"In the current financial climate it's obviously going to be very difficult for government to invest large sums into Eskom's expansion programme," notes Frost & Sullivan energy industry manager Cornelis van der Waal. "However, with a stronger credit rating, Eskom will be able to obtain loans at a better rate. It is therefore crucial for government to back them, as they will be key to delivering growth in South Africa."
Van der Waal would also like to see the introduction of a green energy tax linked to the sale of electricity. This could possible be as little as 1c per kWh, but could create a source of funding for green energy projects, with a specific focus on wind, biomass and solar applications.
"Manuel should also provide clarity on the future spending of government funds on transmission and distribution equipment," he says. "He also needs to indicate how much is available for the continued roll out of rural electrification projects."
With water security becoming an increasingly pressing issue, Frost & Sullivan believes the minister needs to focus a portion of the planned infrastructure spend on water and wastewater service delivery.
"Significant ground has been claimed in the bid to ensure that South Africans have access to clean water and sanitation, however the water and wastewater sector is challenged by skill shortages and ageing water and wastewater infrastructure," says David Winter, the head of Frost & Sullivan's environmental technologies practice. "Particularly at the municipal level, water and wastewater treatment plants are understaffed and poorly maintained."
Winter recommends that there must be focused budget spending on skills development and infrastructure improvement, particularly in the wastewater treatment sector.
The government's recognition of the ICT industry as an enabler for the creation of new jobs and to stimulate economic development should be carried through in this year's budget. During the course of last year, funds were allocated for the improvement of existing technology infrastructure, as well as for the installation of new networks. In 2009, Manuel is expected to announce budgetary allocations for the deployment of network infrastructure at the local and provincial government level.
"Players in the market will also be eager to see further tax incentives, specifically within the SMME environment," says Frost & Sullivan ICT industry analyst Lindsey Mc Donald. "This is where a large degree of innovation occurs. Incentives for innovation and research & development are also important."
The 2010 World Cup is also likely to inform the budget, with additional allocations towards the technology requirements for the tournament.
Finally, Frost & Sullivan would like to see a clear spending plan for addressing the state of the country's public healthcare system.