WITH the drop in revenue collection, the bail out of state owned enterprises, increasing government debt, no allocation for higher education disclosed and the lack of concrete plans to address the pressing issues such unemployment, the Medium-Term Budget Policy Statement (MTBPS) was slammed by opposition parties and FEDUSA and the rand took a dive.
Consolidated budget deficit will widen to 4.3% of GDP in 2017/18, against a Budget target of 3.1% of GDP pic.twitter.com/0n2nKZNeDA
— National Treasury (@TreasuryRSA) October 25, 2017
Summary of the MTBPS
- Conditions in the global economy continue to improve, but the risks of financial turbulence remains high, and the long-term outlook for growth and commodity prices remains muted.
- The 2017 budget projected GDP growth of 1.3 per cent in 2017. Our growth forecast for this year has been revised downward 0.7 per cent. We forecast growth of 1.1 per cent in 2018, and 1.5 per cent in 2019.
- Due to lower than expected economic growth this year, gross tax revenue for 2017/18 is projected to be R50.8 billion lower than projected in the budget.
- The consolidated budget deficit will widen to 4.3 per cent of GDP in 2017/18, against a 2017 budget target of 3.1 per cent of GDP.
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- Gross national debt is projected to reach 61 per cent of GDP by 2022, with debt-service costs approaching 15 per cent of main budget revenue by 2020/21
- Government aims to resolve the setback in fiscal consolidation by: paring down the contingency reserve over the MTEF; cutting into the deficit with fiscal efforts to be announced in the 2018 budget; kick-starting higher economic growth by implementing confidence-boosting measures and implementing reforms; and maintaining the expenditure ceiling.
- The expenditure ceiling is threatened in the current year, as a result of government’s recapitalisation of South African Airways and the South African Post Office. Government is disposing of a portion of its Telkom shares to avoid a breach, with an option to buy them back at a later stage.
- Infrastructure investment will amount to R948 billion over the next three years.
- Efforts to improve supply chain management and achieve value for money in government spending will continue.
Having spent some time with the mid-term budget, here’s the take-home fact: the Zuma regime has destroyed the SA economy for a generation.
— Richard Poplak (@Poplak) October 25, 2017
Spending priorities
To ensure that the budget process is aligned to the NDP, the Department of Planning, Monitoring and Evaluation has prepared a mandate paper which:
- contributes to better alignment between planning and budgeting by providing a clear link between the NDP, the MTSF and budget choices,
- recognises that resources are finite and thus hard choices will need to be made about which government programmes should continue and which should be postponed or shut down, as well as the need for more efficiency in the way departments deliver their programmes, and
- Improves alignment between all spheres of government and include inputs from other stakeholders like provinces and local government on the budget before Cabinet approves the final version.
Spending Priorities pic.twitter.com/6uxDFthaSS
— National Treasury (@TreasuryRSA) October 25, 2017
South African Chamber of Commerce and Industry’s response to MTBPS
While the Minister dealt with the contextual issues and gave an overview of the challenges and what the government intends to do in the economic environment, we were hoping that the Minister would be more explicit with specifics on the agenda to deal with the challenges facing South Africa.
In particular we did not hear much on progress made with the implementation of the National Development Plan (NDP) as it is the core policy of government.
We are anxious and conscious of the risk and challenges posed by youth unemployment.
In terms of the Q2 figures released by Stats SA, youth unemployment was reflected at 38 per cent.
Additionally 32 per cent of youth between the ages of 15-24 were neither in education, training or employment.
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We believe this is a ticking time-bomb that requires an urgent allocation of resources as it may create political and social instability over the next 10 years.
Social and political stability are necessary ingredients to make SA an attractive investment destination. No advanced constitution can diffuse the risk posed by social instability and the perceived lack of social justice.
We urge the government to put concrete steps and resources backed by specific and sustainable projects and programmes to address this significant risk.
The NDP has projected that 24m jobs will be created by 2030 on the back of an average economic growth of 5 per cent.
We are far from this projection and we were hoping that the Minister would give a clear and comprehensive detail on the specific plans, ideas and projects being rolled out to ignite economic growth.
Alan Mukoki CEO
Great Mid-term Budget dispute critics from Capitalists who always expect they interests, than inclusive growth for the poor #2017Budget
— Zukisa Solo (@Zuks_African) October 26, 2017
FEDUSA concerned by widening budget deficit
The Federation of Unions of South Africa (FEDUSA) is gravely concerned that South Africa’s consolidated budget deficit will widen to 4.3 per cent of the Gross Domestic Product (GDP) in 2017/18 compared to a 2017 Budget target of 3.1 per cent of GDP as announced by Finance Minister Malusi Gigaba during his inaugural Medium Term Budget Policy Statement (MTBPS).
The country is faced with the biggest tax collection shortfall since 2009 – R50.8-billion – and a slew of negative numbers from unemployment at its highest in 14 years, increasing levels of poverty affecting millions of South Africans and economic growth that had to be cut down to 0.7 per cent for 2017.
Gigaba said gross national debt was projected to reach 61 per cent of GDP by 2022, with debt-service costs approaching 15 per cent of main budget revenue by 2020/21.
FEDUSA Acting President Chris Klopper, said that the current state of affairs remains totally disheartening with a real regressive state completely evident with the skyrocketing projections.
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South Africa recorded a government debt equivalent to 51.70 per cent of GDP in 2016 and now reaching 54,2 per cent in 2017.
Government Debt to GDP in South Africa averaged 38.65 per cent from 2000 until 2016, reaching an all – time high of 51.70 per cent in 2016 and a record low of 27.80 per cent in 2008.
This certainly does not bode well for the ordinary man on the street, who will be faced with crippling increases on current mortgage and other debt servicing costs that will simultaneously rise, and perpetuate the levels of unemployment, poverty and inequality.
FEDUSA cautions the Minister and insists that prudency must be applied effectively in all aspects within Government Departments to curb fruitless expenses and prevent wastage. Failure to curb expenses, will undoubtedly result in substantial increases in taxes during 2018. We cannot just expect the taxpayer to foot the bill, the State has to provide a considered plan of action to curb expenses as well, insisted Klopper.
FEDUSA believes that the move towards stabilisation and revitalisation of State-Owned Companies (SOC’s) must receive immediate prioritisation. The trend of SOC’s seeking bailouts to finance operational expenditure, inefficiency and waste must also be brought to an end.”
Acting FEDUSA President- Chris Klopper
Mid-Term Budget 2017 was empty and anti-people – PAC
Pan Africanist Congress of Azania (PAC) is deeply disappointed with the Mid-Term Budget Speech 2017 as it shies away from real and genuine issues.
The PAC expected Malusi Gigaba to make pronouncements on free education instead he never uttered a single word concerning our poor student.
The PAC calls for Minister of Finance intervention in Tertiary Education crises, we have to address those challenges now to prepare our students for next year.
We are not informed on how the state SAA going to be rescued or restructured going forward.
We continue to hear the usual rhetoric or claim of fighting corruption.
That Mid-Term Budget 2017 speech was empty and directionless. It is not different to what previous political heads of finance have been postulating since 1994.
We know that anything that was presented today was not pro-people, it was not genuine and seeks to put the blame on the global economic challenges.
PAC Spokesman – Kenneth Mokgatlhe
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