Gigaba maintains tight fiscal discipline
FINANCE Minister Malusi Gigaba has maintained tight fiscal discipline but warned that state-owned entities (SOEs) posed a financial risk to the economy after he was forced to bail them out.
Gigaba told Parliament in his Medium Term Budget Policy Statement (MTBPS) the government has been forced to breach its expenditure ceiling after the bailout of SAA by R10 billion and the South African Post Office by R3.7bn.
He insisted on cost-cutting measures, saying this had saved the country R2bn.
Gigaba also warned the economy was not out of the woods yet, saying revenue collection would drop by R50bn.
This is the first time this has happened since the 2009 financial crisis.
However, Gigaba said there won’t be new taxes to raise revenue.
Sars commissioner Tom Moyane told a media briefing before the MTBPS that there were several factors which had led to the revenue shortfall.
“The efficiency of Sars is measured against the accepted international standards. We need to take cognisance of the economy,” said Moyane.
If the economy was not growing there would be consequences in revenue collection. Many people had lost jobs and companies shut down, leading to low revenues, said Moyane.
In the MTBPS document in Parliament, the National Treasury said strong revenue collection had been driven by policy changes that increased rate collection, growth in key sectors of the economy boosted revenue and growth in capital investments attracted imports with VAT and customs duties.
“This period of revenue buoyancy appears to have run its course.
“The National Treasury projects a revenue shortfall of R50.8bn in 2017/18,” read the MTBPS document.
The MTBPS document said the government was faced with tough choices.
In his speech, Gigaba warned that the government must rein in expenditure and crack down on SOEs.
He said governance issues remained a concern to government.
Eskom is facing an inquiry in Parliament over tender fraud and corruption. It has guarantees of R350bn.
He said a new board of Eskom will be appointed at the end of next month.
The government will dispose of some state assets to recoup the money.
Gigaba did not announce any allocation for higher education, saying President Jacob Zuma would release a report on the Fees Commission.
The report was given to Zuma by Judge Jonathan Heher in August after he finished his work.
On SOEs, Gigaba said they posed a huge financial risk.
He said if lenders were to call in their loans on Eskom the fiscus could not afford it.
Eskom has loans of R350bn to fund its capital expenditure programmes including the three coal- fired power stations of Medupi, Kusile and Ingula.
He said the boards of Eskom, Transnet and Denel would have to be restructured.
Gigaba told the media before his maiden mini-budget speech that South Africa was experiencing tough economic conditions.
“The statement we are making is a candid statement. It puts facts as they are on South Africa’s fiscal framework. We have had to make difficult decisions that we maintain the fiscal framework and we maintain the expenditure ceiling. South Africa is trapped in a slow growth zone and this will persist if we don’t change course,” he said.
What the economy needed was growth and more revenue collection, said Gigaba.
‘Government must rein in expenditure and crack down on SOEs’