Finance Minister Tito Mboweni says despite major spending pressures, the expenditure ceiling remains intact. Mboweni delivered the Medium-Term Budget Policy Statement in Parliament on Wednesday afternoon.

He says government remains committed to sustainable public finances. However, there are concerns about the growing public sector wage bill. It accounts for about 35% of the consolidated spending.

Mboweni says 2018’s public sector wage agreement exceeds the R212 billion budgeted for salary increases and other conditions of service over the next three years. He says departments must carefully manage overtime and performance incentives.

“About 36% of your budget goes to civil service salaries, and then you should be worried because it should be around 30%. But these are human beings. They have families and bonds and children at school and must eat and their expenditure contributes to demand in the economy. But you notice you can’t go on.”

Mboweni says revenue shortfall collection experienced recently would have been larger were it not for increase in personal income and other taxes. He says revenue collection for the first six months of 2018 grew compared to the same period in 2017.

He, however, says the technical recession impacted negatively on revenue collection, and announced no additional tax increases at this time.

“We will urgently fix the South African Revenue Service. It is a matter of public record that the capacity of Sars has been weakened. It is in this context that Sars leadership team must be strengthened. The organisation has many talented and committed employees who want the organisation to succeed and who are working tirelessly to rebuild trust.”

Mboweni says due to higher borrowing, debt service is the fastest growing spending category at 10.9% of the total expenditure.

However, he kept the expenditure ceiling unchanged from what was announced in February.

“For 2018, South Africa’s growth forecast has been revised down from 1.5% to 0.7%. Growth is expected to recover gradually to over 2% in 2021 as confidence returns and investment gathers pace.”

Addressing corruption, Mboweni said he has requested his Director-General Dondo Mojane to make sure that all officials found guilty in connection with the Giyani Water Project are brought to book.

“The Giyani Water Project is plagued by malfeasance. It is a cesspool of corruption. The challenges range from a complete disregard for supply chain rules to poor contract management resulting in irregular expenditure.”

Mboweni says government will zero rate sanitary pads, bread flour and cake flour. He says the revenue loss associated with zero rating these items is estimated at R1.2 billion.

What does the MTBPS 2018 mean?

There’s been a mixed response on the streets to Minister Tito Mboweni’s Medium Term Budget Speech in Cape Town.

In an effort to address issues facing the poor, Mboweni announced that there will be a zero rating on certain foods and sanitary products, making it VAT free. This includes sanitary pads, bread and cake flour.

Mboweni also announced assistance will be given to low to middle income households through housing subsidies amounting to one billion rand. This to allow them to gain access to affordable home loans.