Proposed state expenditure for the new financial year will total R1.56-trillion, and debt payment interests will rise to R169-billion.

Projected revenue is R1.41-trillion, and the shortfall of R149-billion, which is 3.1% of GDP, would have to be borrowed.

Government debt now stands at R2.2-trillion, which is 50.7% of GDP.

Finance Minister Pravin Gordhan said economic growth had been uneven. The bottom 20% of the population have benefited from social security grants and better access to services than before, while the top 20% benefited from the rising demand for skills and from pay increases. But the middle 60% was left behind.

In South Africa, 95% of wealth is in the hands of 10% of the population.

Furthermore, 35% of the labour force is unemployed or has given up looking for work.

Despite education progress, international benchmark testing shows that more than half of Grade 5 pupils cannot read adequately in any language. More than 75% of school leavers were unemployed five years after leaving school, and economic deprivation remained concentrated in townships and rural areas.

South Africa's growth rate has remained sluggish compared to other economies, at 1% per year.

But Gordhan listed many factors on the upside:

State expenditure is within the boundaries projected in last year's budget;

It is expected that R28-billiion will be raised in taxes this year;

The budget deficit for the coming financial year is projected to be 3.1% of GDP;

Government debt is expected to stabilise at 48% of GDP over the next three years;

Redistribution of wealth through expenditure on education, health and municipal service delivery remains a mainstay of state spending patterns, and

The government wage bill has stabilised.

The economic growth rate is expected to improve slightly to 1.3% this year, with the services sector growing the fastest, creating 120000 new job opportunities.

But, in mining and manufacturing, 80000 jobs were lost.

Weak local business confidence levels and low growth in the country's African trading partners contributed to sluggish growth, Gordhan said.

But growth should improve, helped by rising commodity prices and the recovery of the rand.

The severe drought has abated in most of the country, there are fewer industrial disputes culminating in strikes and electricity supply has improved. All of these aspects make Treasury believe the economy should grow faster this year.