Highlights from the Finance minister’s mini-budget

Finance minister, Enoch Godongwana, tabled the 2022 Medium Term Budget Policy Statement (MTBPS) before the National Assembly on Wednesday, October 26.

Also known as the mini-budget, the MTBPS sets out government’s priorities and fiscal responsibilities in the current year. The budget is tabled at least three months before the annual Budget Speech.

The Minister said that although there are challenges that the country’s economy is facing, the future looks bright.

A moderate growth of 1.6% has been predicted for the local economy in the next three years.

“Over the same period, the National Treasury anticipates the country’s economy to shrink over the next three years, saying South Africa’s “economic growth levels remain low and insufficient to tackle high poverty and unemployment”.

The department said the country’s broad recovery from the COVID-19-induced crisis of 2020 was supported by higher global commodity prices, which improved export and fiscal revenues,” Godongwana explained.

Government is expected to step up spending on the “social wage” over the next three years to bring much needed financial boosts to sectors such as health, education, housing and transport.

“The social wage, totalling R3.56 trillion over the next three years, or 59.2% of the consolidated non-interest spending, will take up the biggest share of the budget in support of poor households and the most vulnerable in our society.

“The largest allocations are directed to the education, health and social development sectors,” he said.

Deputy President David Mabuza and President Cyril Ramaphosa seated while the Finance minister delivers the mini-budget in Parliament

Boost for education, health

Minister Godongwana emphasized that the country’s Healthcare system is one of the main priorities for government.

After putting the demands of the COVID-19 pandemic in the budget, the department will now refocus on other core health services and address accumulated backlogs.

According to National Treasury, spending on education is expected to increase, with mid-term estimates indicating that government will spend is excess of R330 billion on the sector.

At least R276.6 billion will be allocated to basic education, with some R61.6 billion channelled towards fee-free higher education and training.

Fixing ‘dysfunctional’ municipalities

By March this year, some 90% of municipalities required the intervention of provincial or national government in one way or another.

Over the Medium Term Expenditure Framework, the Minister said that at least R523 billion is expected to be transferred to local government to address municipal challenges, including service delivery, stabilising municipalities in immediate distress, and developing longer-run plans to improve capability.

“Over the next three years, we propose allocating 48.4% of available non-interest spending to national departments; 41.4% to provinces, and 10.1% to local government. This will allow provinces to support basic education and health services, roads, housing, social development and agriculture.

“We are also allocating additional funds to local government to support the delivery of free basic services to poor households, considering the rising cost of the free basic services, as well as rising bulk electricity and water costs. The 2023 Budget Review will provide more detail on these efforts,” Godongwana said.

Meanwhile, Treasury says government is expected to conduct a review of municipal conditional grants in order to ensure more efficient local government.

According to the department, during the third quarter of the 2021/22 financial year, at least 43 municipalities were “experiencing and service delivery crises”.

R350 Social Relief of Distress extended

The Finance minister told Members of Parliament that the changes to spending plans over the next three years were driven mainly by government’s decision to 9o the special COVID-19 Social Relief of Distress (SRD) grant by one year, until 31 March 2024.

The fiscal framework, he said, also includes funding for the carry-through costs of the 2022/23 public service wage increases, as well as for safety and security, infrastructure investment and service delivery.

The SRD grant was introduced in May 2020 as a temporary measure to respond to the needs of the most vulnerable who were affected by lockdown measures. It has been extended several times since then”.

Discussions on the future of the grant are on-going and involve very difficult trade-offs and financing decisions, he said.

“Despite the provision made in this budget, I want to reiterate that any permanent extension or replacement will require permanent increases in revenue, reductions in spending elsewhere, or a combination of the two,” said the Minister. “This is what is meant by trade-offs: balancing the need to address one priority over another.”

Government spending continues to grow

Over the next three years, the Minister said consolidated government spending was projected to increase from R2.21 trillion in 2022/23 to R2.48 trillion in 2025/26 at an average growth rate of 4%.

“The social wage, totalling R3.56 trillion over the next three years, or 59.2% of the consolidated non-interest spending, will take up the biggest share of the budget in support of poor households and the most vulnerable in our society,” he said.

The largest allocations are directed to the education, health and social development sectors.

Moreover, Godongwana said, over the next three years, spending increases would be prioritised to improve investment in infrastructure and boost the budgets for safety, security and fighting corruption.

Overall, government’s consolidated capital spending will increase, from R95.1 billion in 2022/23 to R145.4 billion in 2025/26. This excludes spending on state-owned enterprises.

Godongwana also said the Treasury is devising a plan that will see the country’s procurement and financial accountability system strengthened.

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