Op­tions to get pub­lic fi­nances on track

CityPress - - Business - MOY­AGABO MAAKE business@city­press.co.za Rais­ing taxes Cut­ting costs Freez­ing posts Re­cap­i­tal­is­ing Pre­par­ing ear­lier

Eight short months after his pre­de­ces­sor Pravin Gord­han tabled a bud­get based on eco­nomic growth of 2.7% this year, Fi­nance Min­is­ter Nh­lanhla Nene’s re­vi­sion down to 1.4% shows the ex­tent of the es­ca­la­tion in the fi­nan­cial prob­lems fac­ing South Africa.

“The Trea­sury projects’ growth will reach 3% in 2017,” he said dur­ing his medium-term bud­get pol­icy state­ment on Wed­nes­day.

This is just 0.3 per­cent­age points above Gord­han’s es­ti­mate for this year, and 2 per­cent­age points off the 5% av­er­age the Na­tional De­vel­op­ment Plan says is needed to get rid of poverty by 2030.

Global fac­tors have played a role in the slow­down, but Nene said do­mes­tic fac­tors such as en­ergy con­straints, strikes and skills short­ages also took a toll on growth.

“As a re­sult of slow growth, tax rev­enue is be­low our bud­get pro­jec­tion. Gov­ern­ment’s debt con­tin­ues to rise as a per­cent­age of GDP.”

Tax rev­enue for 2012/13, es­ti­mated at R1.01 tril­lion in Fe­bru­ary, has come in at R886.1 bil­lion. The debt bur­den is grow­ing – debt ser­vic­ing costs are ex­pected to grow faster than the bud­get as a whole at 9.3% over the next three years, cost­ing gov­ern­ment R415.6 bil­lion as gross debt reaches R2.4 tril­lion by 2018.

Th­ese are the op­tions Nene is ex­plor­ing to bring pub­lic fi­nances back on track.

will be in­tro­duced in the 2015 Bud­get to gen­er­ate ad­di­tional rev­enue of at least R27 bil­lion over the next two years.

will lower its 2014 bud­get ex­pen­di­ture ceil­ing by R25 bil­lion over the next two years. This in­cludes keep­ing bud­gets of non-es­sen­tial goods and ser­vices at cur­rent year lev­els, with­draw­ing fund­ing for posts which have been va­cant for too long, and re­duc­ing grants to provin­cial and lo­cal gov­ern­ments with pat­terns of un­der-ex­pen­di­ture.

The gov­ern­ment head count will be frozen for the next two years – any in­creases will have to be funded from ex­ist­ing bud­gets. Trea­sury, with two other de­part­ments, will con­duct a re­view in the next year to look into per­ma­nently with­draw­ing va­can­cies which are cur­rently bud­geted for. Res­ig­na­tions will cre­ate space for new ap­point­ments and ex­cep­tions will only be con­sid­ered for crit­i­cal po­si­tions.

sta­te­owned en­ti­ties with­out im­pact­ing the bud­get deficit.

In the next two years, re­cap­i­tal­i­sa­tion of sta­te­owned com­pa­nies will only hap­pen in a way that does not af­fect the bud­get deficit, es­ti­mated to nar­row to 2.5% from the cur­rent 3.9% by 2018.

Other than sell­ing non­strate­gic state as­sets to support state-owned com­pa­nies, gov­ern­ment will also ex­plore pri­vate in­vest­ment. Fund­ing will only be al­lo­cated once the state-owned com­pa­nies de­liver sound business plans and greater ef­fi­cien­cies.

has “re­strained” in­dica­tive al­lo­ca­tions for the third year of the minibud­get, leav­ing sub­stan­tial un­al­lo­cated re­sources. Th­ese will be used to build a buf­fer for eco­nomic and fis­cal shocks for the com­ing years, while a sig­nif­i­cant amount may also be con­sid­ered for high-im­pact pro­grammes.

Newspapers in English

Newspapers from South Africa

© PressReader. All rights reserved.