MTBPS 2023 in a nutshell: Budget cuts and more

Finance Minister Enoch Godongwana’s warnings in recent months that government will need to tighten its belts and implement budget cuts amid lower-than-expected revenues were not hollow, as he delivered an austere mid-term budget speech on Wednesday.

This was not unexpected, but his message was clear: Budget cuts are coming, and condition-free bailouts are a thing of the past.

“Our public finances are significantly weaker,” Godongwana declared in his budget speech.

ALSO READ: MTBPS: worse deficit, no major bailouts, but cuts to size of government

MTBPS: Main budget shortfall

He added that the main budget deficit has increased by R54.7 billion compared to the 2023 main budget estimates, while National Treasury DG Duncan Pieterse confirmed that the mid-term budget shortfall is R56.8 billion when compared to the main February budget.

SRD grant extension

Besides the stern tone, the only major announcement in MTBPS 2023 and the budget speech was the extension of the Social Relief of Distress (SRD) grant for another year. The extension will cost the government an additional R34 billion.

ALSO READ: Sassa grant: When to get your money this week

Departmental budgets will need to be cut as Godongwana announced a cumulative reduction in spending of around R154 billion over the three-year medium-term expenditure framework period.

That may not seem a lot in the context of SA’s more than R2 trillion annual budget, but it will see tightening allocations to some departments and poor-performing municipalities.

Nevertheless, SA’s borrowings continue to surge and interest or finance costs swallow up around a fifth of government’s finances currently.

SA will need to borrow an average of R553 billion per year over the medium term.

ALSO READ: Godongwana says fighting crime and corruption needed for SA’s economic growth

Other highlights/features of medium-term budget speech

• SA’s main budget deficit forecast for 2023 has worsened, to 4.9% of GDP, compared to the 4% estimated in the February budget.
• The gross debt will rise from R4.8 trillion in the current financial year to R6 trillion in 2025/26.
• Over the next three years, debt-servicing costs as a share of revenue will increase from 20.7% in 2023/24 to 22.1% in 2026/27.
• Spending has been revised down by R21 billion for the current financial year. Further reductions of R64 billion in 2024/25 and R69 billion in 2025/26 are proposed.
• No bailout was announced for Transnet.
• No further major bailouts were announced for other state-owned enterprises (SOEs) such as Eskom, Denel or SAA.
• Additional funding of R24 billion for the 2023/2024 public sector wage increase (this is lower than an amount of R37 billion cited by Godongwana in May, as the increase will only cover key departments such as education, health and policing/defence. Other departments will need to absorb the increase, according to National Treasury)
• Fast-tracking ‘growth enhancing’ reforms announced by President Cyril Ramaphosa previously. (However, a new financing mechanism for large infrastructure projects is being proposed – no details were provided).

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