Finance Minister Enoch Godongwana promised growth-enhancing economic reforms, but growth is likely to limp along at a glacial 1.6% a year over the next three years.
The Minister delivered his first Medium Term Budget Policy Speech on Wednesday.
Here are some of the highlights as reported in Moneyweb
The current account surplus rocketed to 3.7% in 2021 as a result of windfall dividends paid by companies. This surplus will narrow to 0.6% in 2022.
Revenue collection exceeded targets across most tax categories, and was revised upwards by R83.5 billion to R1.68 trillion for the current fiscal year. This allowed the government to narrow the budget deficit from 4.9% of GDP in 2022/23 to 3.2% in 2025/6, which will also defray some of the risks from higher interest costs.
This will reduce the need to issue new debt and allow government to better manage the spike in debt redemptions, rein in debt-service costs and gradually restore growth in the baselines of key service delivery and infrastructure programmes.
The government is using windfall tax receipts to stabilise the public debt at 71.4% of GDP in 2022/23, reducing it to 69% by 2024/25. This stabilisation comes two years earlier than forecast at the beginning of this year.
Since 2007/08, public debt has risen sevenfold, from R577 billion to over R4 trillion in 2021/22. As a result, payments on the interest for this debt now exceed spending on essential services like health and security. Interest payments will rise to 4.8% of GDP by 2025.
Over the next two years, R66.9 billion will be allocated for health, education and the provision of free basic services by the local government.
The Covid social relief grant is extended for another year.
Headline inflation will tap out at 6.7% in 2022, falling to 5.1% in 2023.
Household inflation peaked at 7.8% in July, the highest in 13 years, before easing to 7.5%.
R11.3 billion is allocated toward infrastructure investment, including rehabilitating damaged municipal infrastructure and refurbishing provincial roads. R6 billion has been allocated to disaster relief, most of this going to reconstruction efforts in Kwazulu-Natal following flood damage earlier in the year.
Eskom
To ensure Eskom’s long-term financial viability, National Treasury is to take over between one-third and two-thirds of Eskom’s R400 billion debt, as part of a series of reforms intended to make it financially sustainable.
This will allow Eskom to focus on plant performance and grid stability. Eskom is also in the process of being unbundled into three separate companies.
Other SOE assistance
The government is allocating R30 billion to Denel, SA National Roads Agency (Sanral) and Transnet in the current year to pay off government-guaranteed debt, in the case of Sanral and Denel, and to repair flood-damaged infrastructure and increase locomotive capacity in the case of Transnet.
Transnet has been allocated R2.9 billion to bring out-of-service locomotives back into service and improve rail capacity. A further R2.9 billion has been allocated to deal with flood damage in Kwazulu-Natal.
These actions aimed at reducing crippling debt in state-owned companies should promote faster economic growth and revenue collection while reducing contingent liabilities.
National Assembly has passed the Economic Regulation of Transport Bill, creating an independent regulator to encourage greater competition. Proposals for third-party access to the freight rail network and private sector partnerships at Durban Pier 2 and Ngqura are under consideration.
Denel is to be allocated R3.4 billion which, together with the sale of non-core assets worth R1.8 billion, will help stabilise the company and unlock a committed order book of R12 billion.
National government will take over 70% of Sanral’s debt and the Gauteng provincial government 30%.
Gauteng will henceforth be responsible for the maintenance of the 201-kilometre Gauteng Freeway Improvement Project.
SOE funding in future will come with strict pre- and post-conditions. Non-compliance with these conditions will mean no funding.
