A budget focused on achieving a long-term vision of growth for South Africa
Finance minister Tito Mboweni presented his much-anticipated maiden budget in Parliament today.
The prescript for the budget included a requirement to achieve a higher rate of economic growth, increased tax collection, achieving reasonable, affordable expenditure and to stabilise and reduce debt. A particular priority now is the configuring of state-owned enterprises and managing the public sector wage bill.
In this 2019 election year, the state aims to keep the country stable
Mboweni said the taxpayer will be spared increases in income tax, and the bill for a bailout of the power utility Eskom. The ordinary taxpayer is fully tax compliant and pays their fair share. Thuma Mina. “Paying your taxes is the right thing to do,” he said.
While the expected hikes in electricity tariffs to fund the national power utility’s R400 billion debt were not announced, R23 billion a year for the next three years will be allocated to the utility to assist it in the unbundling into three entities, as announced by President Cyril Ramaphosa in the State of the Nation address earlier this month.
The key takeaways from the Budget Speech for South Africans were:
South Africans will be paying more for fuel, sugary drinks, cigarettes and alcohol.
Fuel levies will increase by 29 cents per litre for petrol and 30 cents per litre for diesel.
GDP growth is expected to remain stable with economic growth pegged at 0.7%. Gross national debt will still stabilise at about 60% of GDP in 2023/24, broadly in line with the October forecast.
Collection of revenue will be boosted, with a new Commissioner at SARS to be appointed. Two new units, the Illicit Economy Unit and the large business unit, will be formally launched in early April 2019, Mboweni said. SARS is also strengthening its IT team and systems which are crucial for tax collection efforts. In addition, information-sharing agreements with other countries will help fight cross-border tax evasion schemes.
The public wage bill will be reduced by R27 billion over the next three years. Older public servants will be allowed to retire “early and gracefully”, while bonuses and overtime will be limited. Parliament and provincial legislatures and executives at public entities will not be receiving a salary increase this financial year.
The question of state-owned enterprises (SOEs)
Mboweni said that the SOEs pose very serious risks to the fiscal framework. Funding requests from SAA, SABC, Denel, Eskom and other financially challenged state-owned enterprises have increased, with several requesting state support just to continue operating.
Mboweni said the SEOs need to pay back their current loans, and if they aren’t able to service them, he said the country should ask “If we need them. If we don’t need them, what should we do?”
How the budget will be allocated
In line with Mboweni’s mandate to create a budget with a long-term vision, he proposed a three-year spending plan of R5.87 trillion.
This is broken down into:
- Education: R1.2 trillion for learning and culture, for access to quality basic and higher education, developing skills, provide training and contribute to social cohesion. Over R30 billion is allocated to build new schools and maintain schooling infrastructure. An additional R2.8 billion was added to the School Infrastructure Backlogs grant to replace pit latrines at over 2 400 schools. In higher education, R111.2 billion will be spent to ensure that 2.8 million deserving students from poor and working class families obtain their qualifications at universities and TVET colleges.
- Health: R717 billion for health services (including National Health Insurance) and R2.8 billion has been reprioritised to a new human resources grant and R1 billion for medical interns. R1 billion has been added to raise the wages of community health care workers to R3 500 per month. R319 million is allocated to eliminate malaria in South Africa.
- About R900 billion has been allocated for social development. The Jobs Fund, a vital complement to private sector job creation which disbursed R4.6 billion in grant funding and created 200 000 jobs, will receive R1.1 billion in the next three years.
- Business: R481.6 million is allocated to the Small Enterprise Development Agency to expand the small business incubation programme. In addition, government has allocated R19.8 billion for industrial business incentives, of which R600m has gone to the clothing and textile competitiveness programme.
- Land: R1.8 billion is allocated for the implementation of 262 priority land-reform projects over the next three years. R3.7 billion is set aside to assist emerging farmers seeking to acquire land to farm.
- Arts and Culture: The development of a new national theatre, a new national museum, financial support for the National Archives, a national orchestra and ballet troupe is envisioned in the short term.
- Social grants: Government has allocated R567 billion for social grant payments. An R80 increase for old age, disability, war veterans and care dependency grants, R40 increase for the foster care grant to R1 000 and the child support grant will increase to R420 in April and to R430 in October.
- Housing: R14.7 billion has been reprioritised to two new conditional grants for informal settlements upgrading which will enable these households to have access to basic amenities.
- Infrastructure: The South African National Roads Agency is allocated an additional R3.5 billion over the next three years to improve non-toll roads. But expect “the user pay principle”.
- Duty-free and diplomats: Mboweni said duty-free shopping at South Africa airports should be reevaluated and that staffing at diplomatic missions should be reviewed urgently.
- Unquantified changes to the cost of data, expansion of a renewable energy programme and a 9% to 10% carbon tax will be rolled out in the coming months.
Mboweni concluded that the budget “plants a seed for renewal and growth. It is all of our duty to tend the seed and see that it grows strong, tall and fruitful. It is a Budget for the future.”
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