South Africa Economy

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The past decade has seen a growing South African economy and the 2006/07 Budget Speech drew on the fact that South Africa is anticipated to experience an economic growth closing in on a 6% target and inflation remaining around 4.5%. With a broader tax base the economy has realized an additional R41.2 billion revenue collection. This has given the Minister greater flexibility to utilize these additional funds to uplift the poor even further than in previous budgets. To alleviate poverty has been the Government’s priority. Spending on social and welfare grants has been the biggest benefactor since 2001 going up roughly 5.5% in 2006/2007. This proves that the state is serious in uplifting the poor, with R16.2 million allocated to housing and community development. Sanitation, water services and electrification have been prioritized. R23 billion will be spent on improving informal settlements.

Due to this extra revenue collection, the South African budget deficit has also fallen from an expected “3.1% to an actual of 0.5% of GDP” (ABSA ECONOTRENDS, 2006). This will allow and maintain the anticipated future economic growth.

Economists use a Production Possibility Curve, a graph to depict the sacrifice between two products produced. It indicates an opportunity cost, the amount you lose in investing in one option compared to choosing another. The Gautrain Project represents primarily as a capital intensive project, having an expected R20 billion pumped into the project. This indicates on the Production Possibility Curve an investment in more capital than consumer goods. The opportunity cost represented here is that of the funds utilized for the project which could have been used for more pressing consumer needs such as housing. However on the other spectrum one has to consider the anticipated economic spin-offs this project will create. It will move 300 000 people on a daily basis thus reducing road traffic, reducing road servicing and maintenance and most...
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