Finance minister stresses the importance of giving prospects to SA's youth, gives business optimism that government will do so in pragmatic way.

For Pravin ‘Barack Obama’ Gordhan, it was a budget all about hope.

Finance Minister Pravin Gordhan, giving his second budget since taking the helm of the finance ministry in May 2009, said hope was crucial for SA’s young people.

He was right -- the legions of young people in this country could become the drivers of a robust, growing economy at the tip of Africa. Alternatively, those same young people could become the fodder for South Africa’s own Jasmine Revolution.

With 42% of youth between 18 and 29 currently unemployed, without realistic hope for a change in their prospects for employment and dignity, the scenarios of protest in Tunisia, Egypt and Libya in the not-too-distant future cannot be dismissed.

"Young men and women in cities, informal settlements, towns and villages may not have jobs, but have skills in life. They possess the awareness and the ability to learn, they drive fashion and inspire with their music, yet they know their local traditions. And they have hope, and look to us to give meaning to that hope," Mr Gordhan said.

Making those hopes realistic depends on working with the private sector, which hires people and hires more of them as companies expand their scope. And getting the relationship between government and business working smoothly is something that has eluded the country for much of the past 17 years of democracy. But the budget today also gives hope that that is changing. There is a hope that government and business will be able to walk a realistic line through the New Growth Path document published last month with the perhaps idealistic goal of creating 5-million new jobs by 2020 and expand economy at a rate of 4%-7%.

That is in any event likely to take a while, if it ever happens. From an estimated 2,8% GDP growth last year, the economy is likely to expand 3,4% this year, 4,1% next year and 4,4% in 2013, Mr Gordhan said in his speech. Economic Development Minister Ebrahim Patel’s 7% target is still a long way off.

So pragmatism is needed. And some of it is on the way. The government is now committing to a R5bn tax credit over three years to subsidise youth employment – something business has long asked for but that organised labour has opposed.

There will also be more spending on education processes that should make those young people employable: R9bn over three years for a jobs fund (announced by President Jacob Zuma in his recent State of the Nation speech), R14bn for FET colleges and greater student financial assistance.

A sign of economic recovery is coming in income tax revenues. The revised estimate of tax revenue in 2010/11 is R672bn, or 12.3% higher than last year. Personal income tax, VAT receipts and customs duties have increased "strongly", but corporate income tax revenue has remained below projections, indicating the effect of the 2009 recession on company profits. Total budget revenue, including provincial receipts, and income of social security funds and public entities, is R755bn, or 13.6% above the 2009/10 estimate, Mr Gordhan said.

Of course, the economy is fighting with one hand tied behind in some ways. The public service salary bill has doubled over the past five years, from R156 billion to R314 billion. This, as Mr Gordhan said, constitutes just under 40% of consolidated non-interest expenditure. The country needs a working and efficient public service. Whether the country is getting value for money for that wages bill is something many would question.

But there is much in this speech to give hope, not just to the young people who currently have none, but also to government’s undeniable partner in this project, business. A pragmatic approach that expands the economy and then jobs, rather than simply handing out money for unviable projects, is crucial. And there are signs of it now.

As the finance minister said:

"We must offer young work-seekers real hope where at present there is despair.

We need to do things differently. We need to have the courage to pilot new approaches and build new partnerships, promoting innovation throughout our economy."

He might as well have taken the other part of Obama’s campaign slogan: ‘I’m asking you to believe not just in my ability to bring about real change… I’m asking you to believe in yours."