Finance Minister Tito Mboweni’s Medium-Term Budget Policy Statement has focused largely on reprioritising funds. Government has set aside R5.9 trillion to spend over the next three years.
Nearly 60% of this amount will go towards education, health, provision of basic services and social grants.
The mini budget highlights the current difficult economic environment that South Africa is facing and the fiscal choices confronting government.
National Treasury has revised its growth forecast from 1.5% to 0.7%.
Consumers are the hardest hit as a result of the recent depreciation of the Rand. The economy also suffered a technical recession after two consecutive quarters of negative growth.
In addition, the price of fuel is at an all-time high.
Mboweni says the country is at a crossroads. “We must choose to reduce the structural deficit, especially the consistently high growth in the real public sector wage bill. New fiscal anchors may be required to ensure sustainability. In addition to the expenditure ceiling, we must choose the public sector investment over consumption.”
Over the next three years, government will spend more on education, social development and health for National Health Insurance. Pit latrines are going to be eradicated and more than 2 000 additional medical posts will be created.
About R32.4 billion has been reprioritised from underperforming or under spending programmes. This is to accommodate the economic stimulus plan announced by President Cyril Ramaphosa.
“The first element of the president’s plan is to implement growth-enhancing economic reforms. Rebuilding confidence will unlock private sector investment, and investors are in it for the long run. They want to know that our policies are clear and consistent. We must stop talking in contradictory terms.”
Money has also been set aside for the recapitalisation of South African Revenue Services, South African Airways, SA Express and the Post Office.
“Many of the state-owned companies need to be reconfigured. Emphasis is reconfiguration. In the past year, almost all of the regional and domestic routes operated by SAA were profitable. SAA will reduce … ultimately stop operating the loss making routes. SAA has unlocked annual cost saving of about R400 million. Despite this effort, SAA is still loss making.”
Funds from the Department of Justice and Constitutional Development have also been reprioritised. They are to allow Legal Aid to retain public defenders. Money from the South African Police Service will also be given to the Department of Home Affairs to establish the Border Management Authority.
Mboweni also announced measures to deal with municipalities that are facing financial crisis. He says the new grant that government had proposed to help municipalities facing financial crisis will no longer be introduced. Instead, these funds will be reprioritised to assist with turnaround of those municipalities.
Minister Tito Mboweni: Water is critical. Current water delivery models are not working in many cases and we need to consider new ideas and models. #MTBPS2018 pic.twitter.com/oP93knFCeH
— South African Government (@GovernmentZA) October 24, 2018
“All South Africans share the pain of poorly performing municipalities, pot holes here and there, broken street lights roads that flood when it rains and challenges with electricity. We are acutely aware that some municipalities are facing serious capacity constraints in executing their plans.”
The minister says government has started to rebuild important state institutions with two commissions of inquiry currently underway. This includes the Commission of Inquiry into Allegations of State Capture and one which is probing Tax Administration and Governance at SARS.
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