14 January 2016
1.1. Cabinet met to deliberate on the state of the economy and budget related matters. Cabinet noted a number of factors impacting on the economy of the country.
The global outlook has deteriorated in recent months. Slower global growth reflects, in particular, weaker performance and higher risks in several important developing countries, including China.
The welcomed recovery expected in the USA is likely to result in rising global interest rates. Depressed trade volumes and turbulence in global capital markets underscore the need for nations to build resilience and act cautiously in the period ahead.
Cabinet further noted that there were some benefits from the low price of crude oil. As a major commodity exporter, South Africa is concerned about the continued weakness in commodity prices.
Government continues to build on the country’s diverse economic structure, and export earnings continue to depend to a great extent on metals and semi processed raw materials.
The fall in commodity prices is unlikely to reverse speedily. This will have sustained consequences for the South African economy and many of our partners on the African continent.
The depreciation of the Rand over the last few years offers much better prospects for export growth and, combined with a lower global oil price, has helped to relieve pressure on the current account. However, weaker growth in South Africa’s major trading partners has meant subdued demand for South African products abroad.
The global environment is regarded as particularly challenging for emerging markets, with lower commodity prices and tightening of monetary policy in the USA putting pressure on capital flows and growth expectations. This has translated into significant volatility in capital markets.
The South African Rand, which is amongst the most traded emerging market currencies, has been particularly hard-hit in recent weeks.
In this difficult global context, in which all economies face difficult challenges, Cabinet reaffirmed the need for government to intervene strategically and more decisively to restore the momentum of economic growth.
1.2. The National Development Plan provides for these interventions. Government will reach out to social partners, particularly business and organised labour, to build consensus on the collective actions required to stabilise the economy, build confidence, raise the level of investment and return South Africa to a path of inclusive economic growth. The State of the Nation Address on 11 February will take account of this work.
1.3. Cabinet endorsed stronger measures to restore a sustainable fiscal path, taking account of the weakened outlook for the global economy and its domestic consequences. Finance Minister Pravin Gordhan will unveil the measures when he presents the national budget on 24 February 2016.
2. Higher Education funding
Cabinet approved amendments to national budget allocations that would shift resources to fund universities without breaching previously announced spending limits.
President Jacob Zuma and Higher Education and Training Minister Blade Nzimande recently indicated that these allocations would cover the zero-fee increment agreed for the current academic year, clear accumulated debt owed by the National Student Financial Aid Scheme (NSFAS) students and prevent the accumulation of such debt over the medium term.
These intervention measures are a response to a number of consultations which started in October 2015 and are still continuing. The Minister of Higher Education and training with his management team has held a number of meetings with SASCO leadership, all Student Representative Councils, University South Africa Forum , South African Union of Students, the CEO’s of SETA’s , Higher Education Transformation Network and the Parliamentary committee responsible for higher education.
The President also met with the leadership of the students and has announced the setting up of the Commission to look into the issues raised in Higher Education. These engagements are still continuing as we believe as government we do want to work towards finding a lasting solution. The demands of the students are in line with the objectives of the programme of government in respect of education.
2.1.1. As an immediate measure, R2.33 billion has been allocated to resolve the shortfall in operational funding for universities as a result of the agreement on a 0% fee increment for 2016.
2.1.2. In the 2016/17 financial year, government has reprioritized R2.543 billion of State funding to be allocated to NSFAS to provide loans to assist 71 753 identified students who qualified for NSFAS funding but were either partially or not funded at all over the past three academic years. This means that these deserving students will not be prevented from continuing with their studies for owing universities outstanding fees.
2.1.3. A further R2.039 billion will be allocated to NSFAS in the 2016/17 financial year to support unfunded or under-funded students still in the university system in 2016 to complete their qualifications.
These funds are additional to the R10 billion that NSFAS will administer in the 2016 academic year.
Government is committed to providing post-school education for all academically deserving students that is free at the point of delivery for the poor and the working class, within fiscally sustainable limits. Cabinet calls on students, workers, academics and university administrators to work together with government to achieve this goal. Actions that disrupt learning or create unreasonable and practically unachievable expectations are counterproductive. Violence and intimidation are not acceptable.
2.2. Cabinet calls on all South Africans to recognize that there are challenging circumstances in the period ahead. Global economic conditions have weakened. The impact of lower commodity prices is already being felt in South Africa. Domestic constraints such as insufficient electricity supply are still with us. The severe drought is causing hardships in several provinces.
Cabinet is confident that South Africans remain as a resilient nation that knows the value of working together in peace and harmony. The recent exposure of individuals with racist’s beliefs has strengthen our collective commitment to build a nonracial, nonsexist and prosperous society.
Cabinet approved the following appointments:
3.1. Mr Shonisani Mathews Munzhedzi as Deputy Director-General (DDG): Biodiversity and Conservation in the Department of Environmental Affairs.
3.2. Ms Siphokazi Ndudane as DDG: Fisheries Management in the Department of Agriculture, Forestry and Fisheries.
Phumla Williams (Acting Cabinet Spokesperson)
Cell: 083 501 0139
Issued by Government Communications (GCIS)