Real GDP growth revised downwards to 1.5% in 2015 (from 2% in Feb); 1.7% in 2016 (from 2.4% in Feb), 2.6% in 2017 and 2.8% in 2018.
Inflation expected to accelerate and breach target band in 2016: 4.8% in 2015, 6.2% in 2016, 5.9% in 2017 and 5.8% in 2018.
Current account deficit as % of GDP to widen over time: -4.1% in 2015, -4.4% in 2016, -4.6% in 2017 and -4.8% in 2018.
Revenue
Revised revenue estimate is R1.1 trillion, leaving a main budget deficit of R176.3 billion.
Gross tax revenue revised down by R7.6 billion this year and R35 billion over the three-year period.
Consolidated budget deficit R157.9 billion, or -3.8% of GDP.
Revenue estimate R1.14 trillion in 2016/17, R1.25 trillion in 2017/18 and R1.4 trillion in 2018/19.
Spending
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Consolidated budget deficit to decline over the next three years: -3.8% in 2015/16, -3.3% in 2016/17, -3.2% in 2017/18 and -3% in 2018/19.
Expenditure: R1.25 trillion in 2015/16, R1.3 trillion in 2016/17, R1.4 trillion in 2017/18 and R1.6 trillion in 2018/19.
Government expenditure to grow by 7.2% over next three years, remaining above inflation.
Salary adjustment of R1.2 billion for national departments and R3.8 billion for provinces is the main revision to expenditure estimates.
Two substantial allocations provided for in February budget: R23 billion to Eskom (already enacted by the House) and R2 billion to the New Development Bank (financed through sale of Vodacom stake).
Debt
Following the recession, government debt increased from around 26% of GDP to 47% in March this year.
Projection is for debt to rise by a further R600 billion over the next three years.
Gross debt expected to stabilise at 49.4% of GDP in 2018/19.
Net debt expected to stabilise at 45.7% of GDP in 2019/20.
Debt-service costs to grow 10.9% per year – faster than the budget as a whole – reaching about R174.6 billion in 2018/19.
Feedback on cost cutting measures
Cost cutting measures announced in December 2013 (related to use of consultants, travel, entertainment catering and events) have led to:
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In the first year, across all national and provincial departments a 3% decrease was achieved in spending on consultants, 6% in travel and subsistence and a 47% decrease in catering, entertainment and events.
Further reductions expected over medium-term, but not yet full compliance.
Labour instability
Labour relations improve in H1 2015: 176 000 workdays lost due to industrial action (H1 2014: 7.5 million).
CCMA increasingly proactive in settling disputes thanks to changes in Labour Relations Act.
Nedlac working on practical ways to avoid protracted strikes and considering proposals for national minimum wage.
Total claims for Employment Tax Incentive for young employees have amounted to R3.9 billion since start of the program; 36 000 employers have claimed for more than 250 000 workers.
SOEs and government stakes
R2 billion from sale of Vodacom shares to be used as initial capital contribution to the New Development Bank.
The share sale is expected to yield total receipts of R25.4 billion, of which R23 billion has been provided to recapitalise Eskom.
Government guarantees to SAA amount to R14.4 billion, of which R11.4 billion has been used.
SAA only expected to generate sustainable profits in five years’ time.
Sanral’s most recent bond issuance oversubscribed.
Reduction in toll fees has created long-term revenue shortfall that will be shared between national government and the provincial government.
In the first year of the new dispensation, an allocation of R301 million will be made to Sanral.
Electricity constraints
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Government revising Integrated Resource Plan, which maps out future energy mix.
National Treasury working with Department of Energy to consider costs, benefits and risks of building additional nuclear power stations.
Over medium-term R200 million allocated to support preparatory work for nuclear procurement.
Independent power producer programme expanded to include other generation technologies.
Electricity regulator has approved 1 350 MW of short-term power-purchase contracts in 2015/16. Additional 2 500 MW of coal, 3 126 MW of gas, 1 800 MW of cogeneration and 2 609 MW of imported hydro power generating capacity expected to be connected to the grid between 2020 and 2025.
Financial sector reform
Bill to give effect to Twin Peaks regulation has been certified by State Law Advisors and will be tabled next week.
Insurance Bill likely to be tabled before the end of the year.
Work on social security reform (that will accompany retirement reform) at advanced stage.
Treasury engaging with labour to ensure members of provident funds enjoy full benefits of tax deductions.
Draft Bill on Carbon Tax published for comment later this month.
