Finance Minister Tito Mboweni delivered the 2020 Medium-Term Budget Policy Statement (MTBPS) speech in Parliament on Wednesday (28 October).
Mboweni said South Africa’s economy is expected to contract by 7.8 percent this year, adding that it will “grow by 3.3 percent in 2021, 1.7 percent in 2022 and 1.5 percent in 2023.”
Tito Mboweni’s budget speech: A summary
Medium-term fiscal strategy
Mboweni said the government aims to stabilise the debt-to-GDP ratio at 95 percent within the next five years. “The stock of gross debt will rise from roughly R4 trillion this year to R5.5 trillion in 2023/24,” he added.
The government also aims to narrow the main budget primary deficit from an expected R266 billion in 2021/22 to R84 billion in 2023/24. It is targeting a surplus by 2025/26.
Consolidated spending over the 2021 Medium-Term Expenditure Framework is pegged at R6.2 trillion. Of this, R1.2 trillion will go to learning and culture, R978 billion to social development and R724 billion to health.
“We must now rally behind fiscal rehabilitation and growth. Right now, government is borrowing at a rate of R2.1 billion per day,” Mboweni warned.
Mboweni said there are signs that South Africa’s economy is recovering, with a strong rebound expected in the fourth quarter.
“[This] will be supported by government’s Economic Reconstruction and Recovery plan,” he said. Below are the main points he mentioned:
- Government will procure nearly 12,000 MW of new electricity capacity from independent power producers.
- Implementation of the Eskom Roadmap and unbundling is ongoing.
- Government is implementing the Infrastructure Fund. Interventions include R2.2 billion in subsidies and a R6.7 billion allocation to support the Social Housing Programme.
- Government has initiated a process to review Regulation 28 of the Pension Fund Act “to make it easier for retirement funds to increase investment in infrastructure – should their board of trustees opt to do so.”
- Annuitisation of provident funds, which will start in March 2021, will “enable all workers to continue to enjoy tax deductions on their contributions.”
- Government will initiate legislation in 2021 “to allow for limited pre-retirement withdrawals under certain circumstances linked to mandatory preservation requirements.”
Fiscal relief allocations
The Minister announced the following fiscal relief allocations:
- R12.6 billion “to the game-changing employment initiatives championed by the President.”
- R1 billion for food relief.
- R806.7 billion to national departments, R628.3 billion to provinces and R139.9 billion to local government.
- R6.8 billion redirected from public employment programmes to fund the three-month extension of the social relief of distress (SRD) grant.
Discussions are also underway to review the R200 billion loan guarantee scheme “to improve take-up,” Mboweni said.
Revised main budget deficit
The Minister stated, “Altogether, the in-year revised main budget deficit is now expected to be R707.8 billion, a little better than the Special Adjustments Budget.
“As ratio of GDP, it is unchanged at 14.6 percent of GDP. The consolidated deficit is also marginally better in rand terms, but unchanged at as proportion of GDP at 15.7 percent.”
Mboweni said public-sector employee compensation grew at an average rate of 7.2 percent per annum over the past five years, adding that it needs to slow down over the coming five years.
“Consideration should be given to the proposal for across-the-board compensation pay reductions to management-level positions, across national, provincial and municipal governments, state-owned entities all other senior public representatives,” he added.
The Minister announced the following allocations to state-owned enterprises:
- R7 billion to the Land Bank “to support its restructuring.” The Bank received another R3 billion in the June budget.
- R10.5 billion to SAA to implement its business rescue plan. This is in addition to the R16.4 billion it received in February.
Dealing with corruption
The government will allocate an additional R63 million to the state capture commission of inquiry to finalise its investigations and report.
To read or download Tito Mboweni’s budget speech from the National Treasury website, click here. The document is in PDF.