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MEDIUM-TERM BUDGET POLICY STATEMENT

More tax to come, but no SOE bailouts, as Godongwana juggles public finances to extend R350 grant

More tax to come, but no SOE bailouts, as Godongwana juggles public finances to extend R350 grant
Minister of Finance Enoch Godongwana addresses media during the press briefing before the mid term budget speech . 01 November 2023. Photo: Shelley Christians

Enoch Godongwana’s MTBPS highlighted tax hikes tempered by an extension to the Social Relief of Distress grant.

With South Africa’s debt service costs now the fastest-growing public finance expenditure it’s unsurprising Wednesday’s Medium-Term Budget Policy Statement (MTBPS) signalled tax hikes totalling R15-billion to be announced in the February 2024 Budget.

But Finance Minister Enoch Godongwana budgeted another year of the R350 monthly Social Relief of Distress grant, which now ends in March 2025 – with the condition that the government pursues broad social security reform.

In the face of sharp civil society and labour criticism over expenditure cuts this grant extension is an important response on social protection that the MTBPS hammers home – 61% of the non-interest government spending goes to the social wage through health, education, housing and grants. 

With a nod to the Springboks, Godongwana in his prepared speech told MPs: “I am convinced that if we are united and remain committed to this trajectory that will lift up our growth prospects, we leverage the power of the collective, and persevere in this difficult environment, we will come out victorious.”

 But the grim fact is that servicing debt is the fastest-growing government expenditure. In the current 2023/24 financial year, R354.5-billion must go to pay interest on debt – slightly more than R14-billion than was set aside by February’s Budget  – rising to R385.9-billion in 2024/25 and to R455.9-billion by 2026/27 financial year.

That’s more than spending on basic education, health and social protection. Or as the MTBPS put it: “For every R5 collected in revenue, government pays R1 to lenders instead of funding education, policing, health and other critical services.”

And so, the 2023 MTBPS is pushing “a careful balance between supporting a growth-enhancing agenda and stabilising public finances”.

Electricity and logistics reforms are central to this.

Measures to improve Eskom’s efficiency and accountability on the back of an independent review of its coal power stations would be announced shortly, according to Godongwana’s prepared MTBPS speech.

Legislative changes to the Eskom Debt Relief Act would introduce interest rates on the R254-billion bailout and allow the minister to stop allocations. 

No bailout came for Transnet, or any other state-owned enterprise (SOE). And none was planned either, it emerged from Godongwana in the pre-MTBPS lock-up briefing.

“We have not closed the door, but we are not going to open it,” the finance minister said of the next three months negotiation for Transnet to agree to a roadmap that includes operational efficiencies, third party access and other stipulations.

Strict conditionality was part of the lessons learnt from previous SOE bailouts, when money was paid without, for example, better operational efficiencies.

Godongwana defended cuts totalling some R21-billion, even if overall spending increased by R10.3-billion. Those cuts were less than the R28-billion government underspent last year and less the R36-billion underspent two years ago, the minister pointed out to journalists.

The security cluster stood out as beneficiaries of new MTBPS allocations.

Police get R3.33-billion more, with detectives receiving R295.5-million to boost resources in this struggling service that missed around half its performance targets in the previous 2022/23 financial year, according to the annual report.

Controversially, SAPS protection services get R79.4-million more, with the bulk of that, or R52.4-million, going to presidential and VIP protection. And crime intelligence, which has been mired in a series of controversies, including maladministration, gets R43.3-million more.

Defence, which generated R751-million from participating in various peacekeeping missions, gets an additional R1.34-billion, overwhelmingly for staff costs.

Home Affairs gets a R1.31-billion increase; it generated just over R1-billion from issuing passports and smart IDs.

For the president’s salary and that of the deputy president and the ex-deputy president’s “leave gratuity payment”, the MTBPS allocates R6.227-million.

Much of Godongwana’s enforced juggle arises from lower-than-estimated tax collections – R56.8-billion – largely on the back of the end of the commodity boom. And this is further aggravated by rising debt service costs.

“Government faces difficult choices. The central problem is low economic growth. Frequent power cuts make it hard for firms to do business, while deteriorating rail freight and slow port operations mean fewer goods are transported to markets here and abroad,” according to the MTBPS.

Economic growth is expected to hit 0.8% in the current financial year. With gross debt at 77.7% of gross domestic product (GDP) – up from the 73% in February – the budget deficit stands now at 4.9%

To boost revenue, the government is set to borrow R553.7-billion a year for the next three years, according to the MTBPS. And that must go hand in hand with expenditure restraint and getting “better value for money”to ensure debt service costs do not crowd out social and other spending.

Key to the push for effective and efficient public spending was the reconfiguration of the state that’s to unfold over the next three years.

The focus is on eliminating overlaps and duplications, whether larger departments could absorb programmes and projects and clarity on legislative mandates, according to the MTBPS.

Recommendations are being formulated on the closure of programmes and entities in this reconfiguration push headed by National Treasury and the Presidency together with Planning, Monitoring and Evaluation and Public Service and Administration.

In the pre-MTBPS briefing Godongwana signalled President Cyril Ramaphosa could make “concrete” announcements in the 2024 State of the Nation Address. 

A post-election government would be the opportunity to enact at least some of these reconfiguration measures.

It’s also possible the 2024 Budget would announce the compulsory norms and standards on municipal surcharges on electricity as part of a broader local government financing review.

However, the 2024 Budget will announce tax increases to raise an additional R15-billion.

 That Budget also is set to announce, “a new mechanism through which private sector investors and multilateral institutions can co-invest with the government for selected infrastructure projects”, according to the MTBPS. 

The takeaway from the 2023 MTBPS?

Measures to improve confidence to co-invest with the government and to reconfigure the state alongside improved rail and port logistics, and electricity reforms are central reforms to boost economic growth.

“The expectation of a vibrant, inclusive and sustainable economy that works for all South Africans is not a quest to aspire to, it is a reasonable and achievable endeavour. For its part, this MTBPS expresses government commitment to stabilise the foundation upon which this economy lies,” Godongwana said on Wednesday. DM

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  • . . says:

    the Finance Minister can promise all the reform that he likes, but the ANC government has shown zero intention to implement any of it, and I doubt that 2024 will be any different, especially once they have won the election.

    More taxes for those that are left and no chance of things improving.

    The only hope is the ANC lose power or are forced into a coalition with the DA or similar.

  • Mike du Toit says:

    SAPS protection services get R79.4-million more, with the bulk of that, or R52.4-million, going to presidential and VIP protection. How can this be justified when Presidential and VIP protect are already costing the country so much? Crime is a massive problem and therefore providing additional monies to SAPS can easily be justified but based on the above numbers 65% of the R79.4 million goes to Presidential and VIP protection. This is not just controversial but absolute nonsense.

    • Middle aged Mike says:

      I won a bottle of Laphroaig from a midwitted mate for calling an increase in the goon squad budget. The squirrel and his merry band kleptocommies are nothing if not predictable.

    • David Mitchley says:

      Why do these so called leaders need protection from the very same people they claim to represent?
      Why does malema get vip protection, but the same is not provided to steenhuizen?
      Once again it is all about a show of power, the blue light brigade’s are there for the same purpose.
      Personally I think that most people would not even be aware of ramaphoser driving past them on the highway if he was in a chauffeur vehicle with no blue light brigade.
      In certain Scandinavian countries the top politicians use public transport to get to work.

      • Middle aged Mike says:

        “In certain Scandinavian countries the top politicians use public transport to get to work.”

        And that dear readers explains why they aren’t on the fast track to third world basket casery like us. We have an electorate culture problem that rewards narcissistic big manism and that’s why our trajectory is in the opposite direction. It’s pathetic and pitiful but here we are.

  • Mike Blackburn says:

    The minister has a very fine line to walk. I doubt the long suffering South African taxpayer is in the mood for yet more tax hikes – especially when the social contract (I pay tax and I get services for that tax) does not appear to be being followed.

    Something has to give. Nobody will take anything that is said seriously until there is objective evidence of smaller government, fewer ministerial excesses and real service delivery.

  • Kevin Schaafsma says:

    I keep hearing the buzz phrase from government that “we need to address inequality”. The fact is that we live in an unequal society driven by market forces and capitalism. Some people have a car worth R50k and others one worth R1m. Some people will have a house worth R100m, some R10m and others R1m. There is no addressing the inequality of this. But this buzz phrase gets used because it takes the attention away from the real issue. It makes people think the current problems are historical and should be blamed on the ills of the past.
    The real issue though is simply a basic standard of living issue. It is the current government’s responsibility to ensure that all South Africans have at least a certain basic standard of living encompassing a certain level of education, healthcare, housing, food, clean water and so on. Obviously folk should strive to improve on that, but the basic level is a right. We could’ve done this with the resources and international goodwill we had.
    Over the last quarter century what we have seen from the ANC is corruption on such a grand scale that we had to coin a term for it, “State Capture”. This has cost many hundreds of billions, while the graft and ineptitude of the ANC in dealing with electricity has literally brought the country to virtual failed State status.
    So when we hear government talk about “addressing inequality”, this is the BS it feeds to its voters who it intentionally keeps uneducated and reliant on the social grants it dishes out.

  • Anthony Sturges says:

    The government apparently does not have the funds to invest in what it should (which, by the way, just underlines their incompetence in the management of the economy which, if managed correctly would not require these freebies), such as the creation of jobs – by way of infrastructure, Eskom, Transnet etc! This is so patently an election ploy – I would laugh if it weren’t so sad!

  • Peter Metelerkamp says:

    Good to see a summary of the speech so as to not force readers into the sticky tentacles of SCRIBD. A pity, though, to see a government document lodged there and to see typically newly-literate language such as “Recommendations are being formulated on the closure of programmes and entities in this reconfiguration push headed by National Treasury and the Presidency together with Planning, Monitoring and Evaluation and Public Service and Administration.”

  • Lil Mars says:

    Investor friendly policies will go a long way in improving the economy. Clearly our government would rather punish the fewer remaining taxpayers instead. The future is bleak.

  • Even a preschooler could give the government valuable advice on how to start the journey to getting things right with the budget.
    I imagine this would use the example of,
    ‘If a bucket has a gaping hole at the bottom of it, it doesn’t matter how much of water you try filling into it.’

    It’s common public knowledge that there’s many, many politicians with their hands in the state cookie jar, with their tenderpreneur friends assisting them for good measure.

    In the last 2 years alone, 1 of these tenderpreneur/ANC Friend has received state tenders in excess of a Billon Rand spread over 5 tenders of varying amounts.
    He was given a special dispensation by our ‘Leaders’ to receive payment in full for all of them, before starting any of the work. This isn’t SOP for anybody else.
    And you can guess what has happened since.

    Not a single one of these tenders have been fulfilled or delivered.
    All of this to ONE person holding a CC with him being the only employee of said business.
    This is the same guy that was flaunting his wealth on Facebook.
    He received the R172 million rand PPE tender to supply masks,visors, etc to state medical centers.
    That was 2 years ago.
    He has so far supplied around R 5 million worth of equipment and nothing week else.
    However, the very next after the funds cleared into his bank account,
    He became internet famous for buying THREE brand new Porsche vehicles, a Lamborghini Urus, Jeep SRT and other luxury cars on the same day.
    All bought with cold hard cash.
    Young adults from South Africa were the ones showing the most praise and admiration on how accomplished he is.

    They can’t seem to realize that the money used was actually taken from them.

    If that isn’t put an end to asap, there’s going to be a revolution from regular citizens when they announce tax increases.

    Anyways that’s my rant for today.

    I suggest you all try to watch the South African channel on YouTube, ‘Concerned Citizen’
    It exposes how deep this rabbit hole goes and the actual scale of this robbery.

    Keep well and God Bless

    Yusuf

  • Beyond Fedup says:

    Well done Yusuf on highlighting the type of thieving going on in this country, which is endemic. We all know what is happening and are truly revolted and incensed by it. Also the term by Mike on kleptocommies – so very apt!

  • Andre Stols Stols says:

    The ANC just cannot get it right. They budget for a 1,6 % govt employees increase, yet give a 7,5 % increase. America has a population of 335 million with 800 000 govt employees and SA has 62 million people with 1,7 million govt employees- this clearly shows that more than 50 % of govt employees are not productive and to prove that, a person can just walk into any municipality building or a Govt building like the Master of the Supreme court in Johannesburg etc. The Next Govt MUST get rid of at least 1 million employees. Secondly, writing off municipal debt creates an expectation and is financial suicide. Thirdly, there is no way in hell that this ANC Govt will ever be able to afford the suggested NHS. I hope the people can see the picture of South Africa’s downfall at the hands of the ANC and vote them out next year.

    • Seymour Howe says:

      You forget: One to buy the nails, One to transport the nails, one to pass the nails, one to hold the nail and one with the hammer to miss the nail.

  • Middle aged Mike says:

    We’re fubard and no amount of hat wearing and promise making is going to change that. I have had to acknowledge that I bet on a dud by staying in SA when I could fairly easily have moved. I very much doubt I’m alone in that.

  • Mthunyelwa Morrison Sigwili says:

    Constantantly monitor,keep track, and evaluate proposed strategies in order to immediately determine when they derail.
    SOEs, Municipalities, are supposed to generate more revenue as they constantly benefit on bailout. Of impotence value for money and return in investments cannot be left unguarded.
    Lastly, consequent management must apply.

  • Anton Schutte says:

    So, you will not do what is in SA’s interest and fiddle with the R350 grant? Too close to an election for comfort methinks? I realise the desperate plight of many consumers for whom the R350 is a Godsend. But not at the expense of SA’s finances…

  • Jimbo Smith says:

    The same old hymn sheet repeating the same old platitudes, plans, promises that have been bundled into these nauseating, largely meaningless cliches and piles of steaming words. A trade unionist surrounded by his buddies and tired old communists will never grasp that it is all about the ECONOMY which has to grow to create jobs, increase taxes etc., Econ 101! But, reality check; energy crisis for 15 years, dramatic decline in foreign investment, criminal cartels running riot, BEE and other ideological policies, industrial scale theft and corruption across the entire public service, a judiciary in crisis, rampant crime…it’s a helluva list!! This country faces a crisis of monumental proportions and yet this Budget babble paints a picture of…” just give us time to think about what needs to be done. Hell!! Look no further than ESKOM which has been a disaster for years and this hopelessly incompetent ANC Govt simply talks, plans, promises, lies, denies and all the while the lights flicker!

  • Grietjie Outraged says:

    6+ million for three people salaries?
    Maybe all political appointees as well as SOE CEO salaries should be capped at R1 million per year by law! And this should include all fringe benefits!

  • Grietjie Outraged says:

    Maybe there will be enough funds to cover the R350 grants if positions that is filled by political parties is reduced to the level just before PAYE kicks in – I belief it is around R6000 a month. That will bring a bit of equality back into the runaway salary budget of the government.

  • Jane Crankshaw says:

    It will be interesting to see the Long- Term budget…I suspect it will look completely different to this one! Hold onto your hats folks, this is going to be interesting!

  • Leslie van Minnen says:

    You can not win against a self serving bunch of thieves and crooks. SA is already a basket case. Once we collapse, the ANC and their fellow thieves and incompetents will simply move offshore and enjoy the billions of stolen taxpayer money. One only has to look at the rest of the pervious and current African dictators to understand how they looked and continue to look after their own interests. The only brain cells the ruling party has is used to figure out more ideas to steal.
    Remember that all the ANC do is blame the white colonial rule for the country’s problems.

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