1995 - National Treasury

-2.2-
signs of some improvement in labour market
conditions. Improved price stability is also an important
feature of the present economic context.
Against this background, several macroeconomic
requirements for a sustained higher growth rate
can be distinguished:
• Substantially increased investment, including
urban renewal and housing development
and expansion of manufacturing
capacity, must be maintained.
The overall savings performance of the
economy needs to be improved, including a
reduction and reversal of the present imbalance
between the current income and
expenditure of the general government.
Industrial and trade policies which enhance
competitiveness have to be implemented,
directed in particular towards accelerated
export performance.
Foreign capital inflows will be needed to
supplement domestic saving and finance
the balance of payments current account
deficits which will accompany domestic
expansion.
Careful domestic demand management will
be needed to avoid inflationary overheating
of the economy and accompanying balance
of payments difficulties.
Sustained industrial investment will also require
the support of the business sector and organised
labour for a wide range of industrial, trade and
labour market policies, and the general confidence
of the public in fiscal and other policies and in the
overall direction of economic and social development.
Fiscal aspects of this broader economic vision
have been central to the development of the
policies and programmes of the Government of
National Unity and in the design of an
implementation strategy.for the Reconstruction
and Development Programme, discussed in par.
2.1.3. Among the general characteristics of the
policy framework which has evolved to give effect
to the economic and development goals of the
new Government are the following:
New spending priorities are being accommodated
without compromising the overall
fiscal balance or permanently increasing the
tax burden relative to GDP. The role of the
RDP Fund mechanism in this regard is
discussed further below.
Public sector restructuring is in progress,
including the strengthening of provincial and
local governing capacity and the implementation
of appropriate affirmative action
measures.
Tariff reductions and rationalisation, in
terms of South Africa's commitments to the
World Trade Organisation, and other
measures aimed at improving the competitiveness
and export performance of the
economy, are being implemented, with due
regard to short-term adverse impacts on
specific industries orsub^sectors.
The competing claims on the fiscus of the
various social and economic functions of
Government are being resolved through a
restructured budget process which gives
strong emphasis to RDP priorities and
associated reprioritisation.
Foreign exchange liberalisation is to be
effected incrementally, without imposing
unmanageable capital outflows or destabilising
speculative currency movements on
the economy.
An appropriate balance will continue to be
sought between expanded and improved
delivery of public services and support for
sustained expansion of the productive
capacity of the industrial economy.
Underlying these general principles is a strategic
economic vision aimed at addressing the
structural causes of poor economic growth and
the imbalance between the annual increment in
workseekers entering the South African economy
and the pace of formal job creation. The strategy
recognises that the overall claims of the government
sector on the economy have to be reduced
along with trade and industrial policies aimed at
stimulating investment and job creation. More
open international trade and finance flows require
renewed efforts to sharpen industrial productivity,