In a nutshell: Mboweni’s maiden mini-budget. It ain’t pretty.

JOHANNESBURG — These highlights of this year’s Medium Term Budget Policy Statement (MTBPS), courtesy of our correspondent Donwald Pressly in Cape Town, are enough to make one shudder. National Treasury’s growth forecast has been slashed by more than half for the year while the country is left reeling with a R30bn revenue shortfall. It certainly ain’t pretty. Tito certainly won’t have an easy time at Treasury and may be spending the next few years putting out fires. – Gareth van Zyl

Tito Mboweni sworn in as Minister of Finance.
Tito Mboweni sworn in as Minister of Finance.

By Donwald Pressly

Medium-Term Budget Policy Statement highlights:
  • 2018 GDP growth has been revised down from 1.5 per cent at the time of the February Budget to 0.7 per cent, which Treasury says “reflects the impact of the recession”
  • Over the medium term, growth is expected to recover to 2.3 per cent by 2021 “on the back of gradually rising confidence and investment”
  • Consolidated expenditure grows by 7.8 per cent a year on average, from R1.8 trillion in 2019/20 to R2.1 trillion in 2021/22, prioritising education, social welfare, and health
  • Public spending will be reprioritised over three years. Some R32.4 billion will be spent altogether – including nearly R16 billion on infrastructure programmes, clothing and textile incentives and the expanded public works programme. Just over R16 billion will go to fund the SA Revenue Service, a minimum wage for community health workers, critical posts in health and management of the justice system.
  • Changes in grants will see R14.7 billion to promote “upgrading of informal settlements” in partnership with communities. Housing subsidies involving R1 billion would be centralised to “better support middle-and lower-income home buyers.
  • Some 1.7 billion would go for infrastructure spending in the current year – including funding for school buildings while R3.4 billion would be allocated this year to drought relief “mostly for water infrastructure.
  • President Cyril Ramaphosa’s idea of an Infrastructure fund would see government working with development finance institutions and private sector partners in building an infrastructure project preparation “facility”. A funding figure suggested is in the region of raising R800 billion.
  • Debt is expected to stabilise at 59.6 per cent of GDP in 2023/24. It is expected to stand at 55.8 per cent in 2019/20.
  • The 2018 public service wage agreement exceeds budgeted baselines by about R30.2 billion through to 2020/21. The finance minister said public sector worker compensation was too high and hinted at a tough negotiating stance from government ahead.
  • A total revenue shortfall for 2018/19 will amount to nearly R30 billion – R27.4 billion reflecting R9 billion in upward revisions to the VAT refunds estimate, R7.4 billion shortfall in corporate and personal income tax and R11 billion to reduce the backlog of VAT refunds. It was stressed that the refunds payment “is a once-off”.
  • A panel of experts commissioned to investigate mitigating the effect of the VAT rate increase – announced in February – on low-income households has seen government proposing zero-rating of white bread flour, cake flour and sanitary pads from 1 April 2019.
  • The finance minister said the proposed carbon tax would now be introduced from July next year.
  • Treasury is confident that steps being taken would restore the integrity of state-owned companies. The Auditor General was working alongside private firms on the audits of several state-owned companies. Some R27 billion in “previously unreported” irregular expenditure had already come to light.
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