S.A’s finance minister walks a delicate balance between capital budgets and social protection


South Africa’s Finance Minister Nhlanhla Nene is under pressure to stimulate investment into capital projects as well as meet social needs, the Medium Term Budget Policy Statement (MTBPS) has revealed.

Nene in his budget statement indicates that scarce funds available in the expenditure envelope would be targeted to meet pressing social needs.

The finance minister is expected to address social needs at a time the government was experiencing revenue shortfall.


Nene said nearly 13 billion rand would be added to social assistance budget so as to relief poverty and vulnerability on millions who rely on social grants.

He called for re-prioritisation on spending adding that his department was experiencing a drawdown on contingency reserves as a result of the public sector wage agreements.

Other than the revenue shortfall, Nene is also faced with an economy whose growth has been revised downward due to a slump in commodity prices among other reasons.

“Electricity supply constraints, falling commodity prices and lower confidence levels have resulted in our growth forecasts being revised lower,” Nene said in his MTBPS speech.

“The MTBPS projection is that the South African economy will grow at about 1.5 per cent this year, rising marginally to 1.7 per cent next year.”

This projection is lower than anticipated last February when the Treasury envisaged a two per cent growth in 2015 and 2.4 per cent for 2016.

Nene said to address this economic environment, bold action was required.

“Restoring the momentum of growth requires policy certainty, confidence and trust shared between government, business, workers and households.”

The MTBPS also seeks to address social challenges the country is grappling with, especially the triple challenges of poverty, unemployment and inequality.

Failure to create jobs has contributed significantly in the surge in the number of social grants beneficiaries.

Over the spending period ahead, nearly 13 billion rand will be added to social assistance budgets to accommodate the increase in beneficiaries and ensure that the value of grants keeps pace with inflation.

About 16.7 million South Africans receive social grants, up from 2.5 million in 1998. This figure is projected to reach 18.1 million in 2018/19.

According to the statement, social protection is poised to rise from 143.4 billion rand in 2014/15 to 154 billion rand in 2015/16.

According to the policy statement, the proposed medium-term fiscal framework will enable government to “continue supporting social and economic development in a weak economic environment”.

The budget statement also adds that provision has been made to increase social grants to accommodate higher-than-expected growth in grant beneficiary numbers.

The Treasury notes that expenditure growth will outpace inflation by about 1.6 per cen.

“Over the past decade, public spending has doubled in real terms, funding a large expansion of social and capital budgets.”

The statement also indicates a shift from the black empowerment policies that have largely seen a majority of the country’s populace blaming it for bias, corruption and benefiting a few connected individuals.

“Procurement reforms have already begun to make tender awards more transparent and less susceptible to corruption, and will achieve savings,” said the Treasury.

The Treasury also indicated the government’s robust approach to ensuring universal access to education.  Basic education has seen a sharp rise in allocation from197.4 billion rand in 2014/15 to 213.9 billion rand in 2015/16. This is expected to reach 270 billion rand in 2018/19.