Budget in a Nutshell – Eskom, greylisting, SANRAL and Transnet the focus points

By Alec Hogg

  • Treasury has agreed to take over responsibility for between one and two thirds of Eskom’s R400bn debt. Full details will be provided in the February 2023 Budget address.
  • Implementation of structural reforms is being accelerated, with efforts concentrated on reforms in the electricity sector. The removal of licensing for electricity generation has seen the national private sector pipeline grow to 100 projects, representing over 9 000MW of capacity.
  • The National Energy Crisis Committee will focus on urgently improving the performance of existing power stations and adding new generation capacity to the grid, adding about 14 gigawatts of electricity capacity over the next two years.
  • New laws have been promulgated that provide for the establishment of an independent transmission and system operator “which will fundamentally transform the electricity sector”.
  • Treasury is “doing everything possible” to prevent South African being grey-listed by the Financial Action Task Force when it meets early next year. Two major bills have been tabled for approval by Parliament before the end of the year. They will address weaknesses and meeting the 40 recommendations made by the global body that oversees global compliance on anti-money laundering rules.
  • After “seven years of dilly dallying” a line has been drawn under the Gauteng Freeway Improvement project with National Government taking over 70% of SANRAL’s R47bn debt – the balance being for the account of the Gauteng provincial government which will be required to pay for the maintenance of the structures. This means the decision on whether or not to abolish eTolls rests with the province.
  • There is also major reform in transport with new laws allowing for the establishment of an independent transport regulator “to encourage greater competition and enable regulated access to the network”. Requests for proposals have been issued, enabling private sector access to the freight rail network and partnerships at the Durban and Ngqura container terminals.
  • A consolidated Budget deficit of 4.9% of GDP is projected for the current financial year, falling to 3.2% by 2026. A primary fiscal surplus (excluding interest repayments) of 0.7% will be achieved in 2024, one year earlier than was forecast in February.
  • The cost of Parliament’s fire has been quantified with an allowance of R2bn made to rebuild the damaged areas.
  • Due mainly to higher-than-expected company tax, particularly from mining, the SA Treasury’s total tax revenue is now forecast to come in R83bn above the number budgeted in February.
  • Of this year’s revenue overrun, R37bn has been added to Treasury’s budgeted expenditure – the big allocations being to continued SOE bailouts: R24bn to roads agency SANRAL (to settle debt); R6bn to Transnet and R3.6bn to Denel. The Land Bank is still in distress and the R5bn set aside in a previous Budget has not yet been released.
  • Treasury has expanded the Budget by adding a further R95bn to expected revenue in 2024; and a further R100bn in 2025 due to a growing tax base and confidence in improved collections from SARS. The windfall from higher commodity prices is expected to fall away in these years.
  • The anticipated increase in future revenue will be used to fund additional non-interest spending of R52bn in 2024 and R58bn in 2025. The major increase is for an extension of the COVID-relief grant over the next two years (R67bn). This grant, received by 7.4m people, was extended in the Budget until 2023. This temporary grant has now been extended for another year and will only end on March 31, 2024.
  • There are also significant allocations to the municipal and provincial road infrastructure (R11bn) and for Safety & Security (R9bn).
  • The recently widening hippo’s jaws, with expenditure growing faster than revenue, are projected to close in 2024 with a primary (non-interest) Budget Surplus projected – a position that is expected to improve still further in 2025.
  • Despite the improving fiscal position, debt serving costs are growing at 7.3% a year. This means the overall Budget deficit (including interest) means SA Government debt is expected to increase from R4.75 trillion in 2023 to R5.61 trillion in 2025.
  • The Gross Debt-to-GDP ratio is now expected to peak this year 71.4%, two years earlier than expected. It is then projected to fall slightly annually, reaching 70% in 2026.
  • Consolidated government spending is projected to grow at 4% a year from the current R2.2 trillion to R2.5 trillion in 2025.
  • Spending on buildings and other fixed structures is projected to increase at a rate of 19% a year, from R67bn this year to R112bn in 2026.
  • Visas: Several visa reforms have been completed. These include reviewing the policy framework and processes for work visas.

For more MTBPS insight be sure to join Alec this evening at 7pm. You just need to register for the webinar here – https://attendee.gotowebinar.com/register/2749266579740443662

Read also:

(Visited 2,968 times, 10 visits today)