South Africa’s finance minister painted an upbeat picture of the economy Wednesday, forecasting five percent annual growth to the end of the decade as he posted a first budget surplus in recent memory.
Outlining spending priorities in a three-year budget of nearly two  trillion rand, Manuel said tax collec-tion had exceeded budget expectations by 29 billion rand in the past financial year.
This yielded a five billion rand budget surplus — the country’s first in around three decades, dating back to when South Africa was governed by a whites-only regime.
Another surplus was envisaged for the coming fiscal year, of about 0.6 percent of gross domestic product (GDP), the minister told parliament.
“Once again, economic performance has exceeded expectations,” he said.
“Economic growth is projected to average just over five percent a year
over the next three years.”
Manuel said the country had 25.9 billion dollars in foreign reserves compared to 5.5 billion dollars eight years ago, the debt ratio was 26  percent of GDP compared to 49 percent, economic growth had doubled and job creation rose from 200,000 to 500,000 a year.
He announced he had 89.5 billion rand more to spend over the next three years than envisaged a year ago, bringing the 2007/08 budget to 534  billion rand, followed by 594 billion the following year and 650 billion in 2009/10.
This represented annual spending growth of 7.7 percent.   In allocating this money, the government sought to balance the demand for reducing wealth inequalities with the need to keep the economy steaming  ahead, the minister said.
“We must use these resources so that human life can indeed have equal worth,” he added.“Without a powerful countervailing force, the shadow of history will dictate opportunities, entitlements and outcomes.”
Just over eight billion rand would be made available for more and better paid teachers and 5.3 billion rand for staff in the health sector.
An extra 1.7 billion rand was set aside to double the number of people on government-sponsoredAIDS treatment to 500,000 in the next three years.
One billion rand would be spent on hospitals, 2.7 billion rand on  housing
and 2.4 billion rand on boosting the number of police and upgrading technology to address the country’s rampant crime problem.
Manuel announced a mandatory social pension system, financed by a special
tax, to provide the poor with retirement, unemployment, disability and death benefits by 2010, as well as a low-income wage subsidy.
Individuals are to benefit from moderate personal income tax relief
amounting to 8.4 billion rand, and the elimination of tax on retirement  funds.
But excise duty on cigarettes will rise by 60 cents per packet, by five cents for a can of beer, and 10 cents for a bottle of wine.
For the business sector, he announced further exchange control  relaxation and a replacement of the existing secondary tax on companies by a dividend tax reduced by 2.5 percent.
Opposition political parties had mixed reactions.
The Democratic Alliance accused Manuel of paying lip service to accelerating economic growth.“Once again Minister Manuel has failed to give any significant measures to stimulate the supply side of the economy, boost confidence, bring down the cost of doing business in South Africa and stimulate private sector investment,” said the party’s finance spokesman Ian Davidson.
„A cut in the corporate tax rate was justified.”
The Zulul-based Inkatha Freedom Party agreed with increased welfare spending, but cautioned against “the creation of a ‘welfare honeypot’ that can be creamed off by corruption.”