By: Monique Vanek
In a press conference with media ahead of the release of the Medium Term Budget Policy framework, South Africa’s Finance Minister Malusi Gigaba said it aimed to be as candid as possible about the dire situation South Africa finds itself in. Below are the highlights.
Economic outlook is dire
- 2017 Economic growth revised downwards from 1.3% to 0.7%.
- Growth expected to reach 1.9% in 2020.
- GDP per capita has declined for two consecutive years.
- 95% of our wealth is in the hands of 10% of the population.
- SA has twin challenge of growing economy & ensuring inclusiveness.
- SA’s expenditure ceiling could be breached by R3.9bn this year, mainly as a result of government’s recapitalisation of South African Airways and the South African Post Office. Government is considering the disposal of assets to offset this.
- In 2016, gross fixed capital investment declined by 3.9%, with large decreases in mining and manufacturing.
- Capital investment is expected to decline by 0.6% in the current year.
- Government debt held by non-residents has risen from 4.4% of GDP in 2007 to 17.6% of GDP in 2017. A sharply negative shift in global investor sentiment towards South Africa could result in large capital outflows, with highly destabilising consequences for the economy.
- Per capita income expected to continue to stagnate in the years ahead
- The consolidated budget deficit will widen to 4.3% of GDP in 2017/18, against a 2017 Budget target of 3.1 per cent of GDP.
- Gross national debt is projected to reach over 60% of GDP by 2022, with debt service costs reaching 15% of main budget revenue by 2020/21.
- Aims to kick-start inclusive growth by implementing the 14 measures announced by Gigaba in June.
- A presidential task team is considering a range of steps to bring the public finances back onto a sustainable path.
- Growth must be characterised by radical economic transformation.
Asset registry to be created
- Government plans to have a full asset registry available by March 2018 of non- and core assets that it can disposed of to ensure it does not breach its expenditure ceiling
- Government is still considering whether to sell its stake in Telkom
Tax revenue shortfall
- Gross tax revenue for the 2017/18 – 2019/20 period is projected to fall short of the 2017 Budget estimates by R209 billion.
- Tax revenue projected to fall short of the 2017 Budget estimate by R50.8 billion in the current year
- Cabinet has approved the release of the carbon tax bill to Parliament
- Treasury to relook at medical tax credits
Tax revenue and administration
- Government is noting slippage in tax compliance
- SARS working with FIC & SARB to close tax gaps
- SARS, FIC & SARB’s ability to combat cyber-crime must be enhanced
- Treasury engaging with SARS on Tax Ombud recommendations relating to tax refunds.
- The public sector will spend more than R300 billion each year on infrastructure, with about half of this funded directly from the budget.
- Lion’s share of economic infrastructure will be provided by State Owned Companies;
- Municipalities spending is projected to be R197bn
- Provinces are anticipated to spend R208bn over 3yrs
- Education sector expected to spend R44bn
- Cabinet approved Budget Facility for Infrastructure
- Department of Planning, Monitoring & Evaluation has prepared a mandate paper
- Government will protect spending on core social programmes that benefit poor
- Over next 3yrs consolidated spending will increase by 7.3% to R1.9trn in 2020/21
- Community development, learning, culture & health are the fastest-growing functions
- No academic deserving student must be excluded due to financial constraints; more in budget 2018
Stabilising and revitalising state-owned companies
- The trend of SOCs seeking bailouts to finance operational expenditure, inefficiency and waste must end
- Proposals to be made to make Govt guarantee framework more stringent
- Retaining a national carrier is in the public interest
- A strategic partner is still on the agenda for SAA
- Eskom’s governance issues are a major concern
- National Treasury to work with DPE to strengthen governance at Eskom
- New board for Eskom before the end of November