South Africa's budget speech was presented for what may be the penultimate time by Minister Trevor Manual this week. The budget appears to have been pretty much in line with expectations, and the trend from prior years, namely a conservative budget with a focus on government spending. There has been a swing over the past couple of years to more infrastructure spending, which we believe is a good thing in light of South Africa's burdgeoning unemployement crisis. Some commentators have noted the large portion of government spending dedicated to social spending. This obviously is not a good thing as it does nothing for the growth and sustainability of the country's economy, something we believe is key to the long term success of the country as a whole.

An attempt to encourage international investment appears to have been made, also a good thing. We would like to have seen this more prominently promoted and tied to an active reduction in Exchange Controls. The big change in the budget is that the Minister is forecasting a budget deficit, which has now ballooned because of the knock on effects of the global economic crisis. This will increase the country's debt levels, which on their own are not anywere near serious levels, when read with the current account deficit of 8% of GDP could be a cause for concern about stability. For a good, balanced commentary on the budget from an economic standpoint please go to Morgan Stanley's commentary on the topic.