South African markets put in a mixed performance yesterday as official interest rates fell again and finance minister Trevor Manuel raised the country's budget for the current fiscal year. The government remained committed to an open capital market and the gradual relaxation of exchange controls, the 1998 medium term budget policy statement said yesterday. Sound monetary and fiscal policies had allowed South Africa to weather the worst of the turmoil in international financial markets this year, the statement said. South Africans face a high tax burden over the next three fiscal years because of a drastic slowdown in economic growth. Capital expenditure is set to plummet next year as high interest rates take their toll, according to economic projections released in government's medium-term budget policy statement.
Infrastructure is one of many areas competing for government's spending priority list.
Tough economic times demand tough choices. They force governments to re-assess their spending priorities, investors to contemplate their options and consumers and producers to take a fresh look at the goods and services they want, need and can afford. South Africa needs, among other things, the right decisions about spending on and consuming infrastructure services. The country's policies acknowledge the importance of infrastructure for growth, eradicating poverty and improving quality of life. South Africa needs to lower its cost of capital, let the rand find its own level, tackle the relatively high cost of labour and build on its competitive advantages, says Michael Power, emerging markets fund manager at Baring asset Management.