SA’s Medium-term budget highlights

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.

Photo: Flickr.

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

Tax changes

  • 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.

Spending priorities

  • 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

 

 

Related Content

SA’s #MTBPS2018: Key takeaways

In 2017/18, for the first time since the 2008 global financial crisis, tax revenue growth did not exceed GDP growth.

#MTBPS2018: Public servants’ wages balloon, but headcount is not to blame

The wage bill remains the single largest component of expenditure.

SA’s #MTBPS2018: These are the tax changes government is warning of

No mention of VAT-free chicken.

#MTBPS2018: SARS withheld tax refunds under former Commissioner Moyane, these are the consequences…

#MTBPS2018 reveals dire consequences of former Commissioner Tom Moyane’s regime.

Subscribe to our newsletter

Sign up for free newsletters and get more CNBC AFRICA delivered to your inbox

More from CNBC Africa

What Does The Future Of Air Travel Look Like?

Of all the industries the coronavirus pandemic has affected, the airline industry is among those that have been hit the hardest. According to the International Air Transport Association, airlines' passenger revenue is estimated to sink by over $300 b

Fitch expresses doubt over SA’s debt consolidation plans

Just last week finance minister Tito Mboweni outlined the emergency budget to nurse South Africa through the Covid-19 crisis. A big part of this budget was a plan for South Africa to get its debt under control within four years. Fitch Ratings, the agency that downgraded South Africa in April doubts whether South Africa can do this. CNBC Africa’s Chris Bishop spoke to Jan Friederich, Senior Director of Fitch Ratings for more.

Rwanda, USAID sign over $643.8 mn deal to support trans-formative development

Rwanda has signed a financing agreement with the USAID worth about $643.8 million to support Rwanda’s development efforts in the next five years. Moreover, Rwanda Convention Bureau announced the reopening of meetings and conferences. Edwin Ashimwe, Journalist with The New times joins CNBC Africa for more.

How COVID-19 is reshaping Kenya’s education system

On the continent, there has been an increased awareness of the impact of cultural practices on educational achievement that has challenged the education systems. In Kenya, the government is investing in all forms of education; however, experts have noted that for the rise of automation and technological advancements to be effective, an updated skill set is required. Ayub Odida, Researcher at ACAL Consulting joins CNBC Africa for more.

Partner Content

Sanlam launches urgent job-preservation initiative in response to COVID-19

Sanlam Investments is responding to the COVID-19 pandemic through large-scale support of the recovery of South African companies, from small enterprises to...

Is Market Volatility Here For The Foreseeable Future?

Content provided by CompareForexBrokers Prior to understanding why market volatility might be here to stay for the foreseeable future,...

Trending Now

Land Bank default forces S.Africa’s central bank into $200 mln bailout of state investment arm

JOHANNESBURG (Reuters) - South Africa’s central bank has issued a 3.45 billion rand ($200 million) guarantee to bail out the Corporation for...

Zimbabwe’s Landela agrees to buy state-owned gold mines, seeks more assets

HARARE (Reuters) - Zimbabwe’s Landela Mining Venture has reached agreements to take over and revive four idle state-owned gold mines and is...

How Zimbabwe farmers will be trained how to farm with a scheme from Belarus with love

When the farm invasions were unleashed by the people in power in 2000, it led to bloodshed and random confiscation that reaped a bitter harvest of lost production and exports that persists until this day. That year with all of its fumbling fury fuelled with the idea that to get rich you merely had to own a farm, is always seen as a turning point for the industry. It created a large slice of the country’s GDP and as it fell, so did the fortunes of Zimbabwe.

South Africa’s National Treasury says “no further action” to bailout SAA airline

CAPE TOWN (Reuters) - South Africa’s National Treasury said on Friday there was “no further action” planned to bailout struggling national airline...
- Advertisement -