Debt servicing costs are among the government’s top four expenditure items in the 2020/21 budget allocations. This receives about 25% of the total expenditure, pushing it into the fourth position on the list of allocations.
Government’s total allocations for this financial year amount to R1.95-trillion and over half of that will go towards social spending.
Budget 2020 highlights
Education
The Department of Education continues to receive the largest share of government allocations. It has been allocated R396.4 billion for Basic Education, university transfers, as well as the National Student Financial Aid Scheme (NSFSAS).
Finance Minister Tito Mboweni says, “Investment goes to new schools replacing schools constructed with inappropriate materials, and providing them with water electricity and sanitation. In 2020/21, the Maths, Science and Technology grant will introduce coding and robotics to learners in Grades R to 3 as announced by the President.”
The second-largest allocation is Social Development, which has been allocated R309.5 billion for among others social security funds, old age grants as well as child support grants.
Video: Education and Social Development get the lion’s share
Social grant
Mboweni says social grant increases are in line with inflation, expressing that over the next three years, the total number of grant beneficiaries is expected to increase by almost one million to 19 million people.
“I am happy to announce that grants are adjusted as follows; R80 increase for old age, disability and care dependency grants to R 1860 per month; R80 increase in the war veterans grants to R 1880; R40 increase for the foster care grant to R1040 per month. The child support grant will increase by R20 to R445 per month.”
Health
The Department of Health has been allocated R229.7 billion and a total of R55.6 million will be reprioritised over three years to strengthen the department’s capacity to phase in NHI.
The issue of South Africa’s debt to GDP ratio has been a concern in recent years, and rating agencies are keeping a close watch on it. That’s with more funds going towards debt servicing costs.
Treasury forecast that debt to GDP would peak at 64% in 2020/21.
Security
The Police, Defence and State Security, courts and prisons as well as Home Affairs Department have been allocated R217.0-billion. Community Development has been given R212.3-billion.
“The NPA, Special Investigating Unit and Directorate of Priority Crime Investigation get an additional R2.4 billion in this budget. This will enable the appointment of approximately 800 investigators and 277 prosecutors who will assist with among other things, the clearing the backlog of cases such as those emanating from the Zondo Commission,” the Minister adds.
General Public Services are receiving R70 billion.
Consolidated expenditure
This year, gross national debt is projected to be R3.56 trillion or 65.6% of Gross Domestic Product. Mboweni says, “2020/21 revenue is projected to be R1,58 trillion or 29.2% of GDP; expenditure is projected at R1,95 trillion or 36% of GDP – this means a consolidated budget deficit of R370.5 billion or 6.8% of GDP.”
Some economists have referred to this 2020’s budget as a make or break for the economy.
“Total consolidated government spending is expected to grow at an average annual rate of 5.1% from R1.95 trillion in 2020/21 to R2.14 trillion in 2022/23. This is mainly due to mounting debt-service costs. Non interest spending declines on average over the MTEF in real terms as a major step towards fiscal sustainability. Today, we announce a net downward adjustment to the main budget non-interest expenditure of R156.1-billion over the next three years relative to the 2019 budget projections.”
The Minister also allocated additional funds to Stats SA for 2021’s census and R1.9 billion over three years to fund reduced tarrifs for the e-tolls.
