Finance Minister Enoch Godongwana has warned that the boom in tax revenue collection is short lived and challenges to sustain growth remain.
South African Revenue Service (SARS) has reported better than expected tax revenue collection due to commodity boom in the previous financial year.
Government expects to collect a minimum of R83.5 billion more revenue than budgeted for by next year.
Godongwana was speaking at the Sacci Mid-Term Budget Policy Statement Luncheon in Sandton, this week.
He is optimistic SARS will collect more-than-expected tax revenue in the coming financial year. He says the extra money will be used to pay long-standing debts in some SOE’s and municipalities that were affected by floods.
“Now, the problem with that, those are short-term revenue. (It) can’t fund long-term commitment. That’s why I’ve used a lot of those things in the in year. You’ll see I have services. Sanral debt paid, R5.8 for Transnet, and so on, because those are once-off payments. And these revenues are short-term revenues. But the effect of that is a primary balance, which will have us moving forward. And sustaining also the ratio of debt to GDP ratio at about 70%.”
Meanwhile, international rating agency Moodys has listed Eskom’s outlook to positive from negative – the first time in 15 years. Government announced last week that it would take a portion of Eskom’s debt into its balance sheet.
The finance minister did not specify how much of the Eskom debt government would take. Treasury is creating a debt relief program for the struggling state-owned power utility.
Godongwana says government is addressing the electricity problem and focusing to resolve it.
“People say, but why do you want to take Eskom’s debt?” I don’t have a choice. I’m between a rock and a hard place. If Eskom defaults, I’ve provided guarantees to Eskom (who) have close to R350 billion. If Eskom defaults, they’re going to drag the sovereign with them. So, people are saying what? Wait, I’ve got no (choice). I’m between a rock and hard place. So I’ve got to take that debt. But I’ve got to make sure that there are efficiency gains. Those are the conditions I’m going to try to acquire from them.”
Government says it is working to create a flexible exchange rate, address the high inflation and sustain fiscal policy. It is also addressing challenges at the ports and rails.
Godongwana has urged businesses to engage with them.
“We’re quite confident that we will narrow the budget deficit, stabilise the debt, achieve fiscal sustainability. Those numbers … if we’re going to take Eskom debt, we’ve got to do it in such a manner that we let fiscal sustainability remain.”
Finance Minister Enoch Godongwana’s 2022 Medium-Term Budget Policy Statement: