Category: Budget Speeches

Finance Minister Enoch Godongwana will this afternoon present the 2023 Budget Speech.

“President Cyril Ramaphosa, in his State of the Nation Address on 9 February, announced government’s plans to address South Africa’s energy crisis and prevailing socio-economic challenges.

“In this regard, Minister Godongwana will provide details of spending and revenue collection proposals to implement these plans. He will also outline the funds to be allocated to different spheres of government, departments and entities,” said Parliament in a statement.

Minister Godongwana will, as part of the 2023 Budget Speech, also introduce the Appropriation Bill and table the Division of Revenue Bill to Parliament.

Godongwana is scheduled to deliver the 2023 Budget Speech at a sitting of the National Assembly (NA) to be held at the Cape Town City Hall at 2pm.

The speech is expected to be broadcast live on various news and radio channels, as well as the parliamentary channel.

You can also watch the live stream of the 2023 Budget Speech on the SAnews Twitter @SAgovnews feed.

National Treasury has published on its website the operating and capital budgets of municipalities as adopted by their respective councils.

In a statement, the department said these budgets give an overview of expected revenue and expenditure trends in local government over the next three years, referred to as the 2022/23 Medium Term Revenue and Expenditure Framework (MTREF).

The revenue and expenditure numbers are aggregated from the annual budgets that municipal managers are legally required to submit to the National Treasury and the relevant provincial treasury.

“The published information is presented in a variety of ways, including aggregated municipal budget totals for the 2022/23 financial year and over the medium-term period. In addition, the information is presented per category of municipality and province,” said the Treasury.

Highlights include:

• The aggregated budgeted revenue for 2022/23 is R529.7 billion, which is expected to increase to R558.1 billion in 2023/24 and R593.9 billion in 2024/25;

• Total municipal expenditure in 2023/24 is estimated to be R557.4 billion, increasing to R582.1 billion in 2023/24 and R614.5 billion in 2024/25. Total expenditure for 2022/23 is 5.1 per cent higher than the adjusted budget for 2021/22 financial year;

• Municipalities will realise operating deficits on the operating budgets in the 2022/23 financial year as the total operating expenditure increases at a higher rate than the revenue projections. This is an indication that municipalities are living beyond their means and a first sign of financial challenges. However, the situation is projected to improve in the outer years of the 2022/23 MTREF as operating surpluses will be realised;

• A net deficit of R269.6 million is expected in the 2022/23 financial year, which improves to a surplus of R3.5 billion in 2023/24 and R7.3 billion in 2024/25;

• The main cost drivers are employee related costs and materials and bulk purchases representing 28.9 per cent and 32.7 per cent of the operating expenditure respectively.Municipalities are experiencing a two-fold impact of the high electricity and water tariff increases; lower sales levels owing to changes in consumption patterns and increased bad debt as a result of affordability pressures;

• Capital expenditure increased by 1 per cent to R69.7 billion in 2022/23 compared to the original budget for the 2021/22 financial year. Capital expenditure in aggregate represents 12.5 per cent in 2022/23, 11.7 per cent in 2023/24 and 11.4 per cent in2024/25 of the overall budget of municipalities;

Trading services (electricity, water, wastewater management and waste management) represents 49.7 per cent of the total capital expenditure of R69.7 billion in 2022/23 and slightly decreases to 49.1 per cent by 2024/25;

• The 2022/23 capital expenditure budget reflects a R43.8 billion investments in new infrastructure which is 62.8 per cent of the total aggregated capital budget. Investment in the renewal and upgrading of existing assets is much lower at R10.9 billion (15.6 per cent) and R15.1 billion (21.6 per cent) of the total capital budget respectively; and

• Reporting on operational repairs and maintenance figures has been institutionalised as part of Section 71 in-year reporting. Municipalities allocated R27.7 billion to repairs and maintenance of assets in 2022/23. This will increase to R29.2 billion in 2023/24 and to R30.9 billion in 2024/25.

National Treasury publishes local government MTREF information on an annual basis.

Regularly published budget information enables communities to hold their municipal councils to account. The information is also used by National Treasury as the basis for the In-year Management, Monitoring and Reporting System for Local Government (IYM).

The Section 71 reports published by the National Treasury give an account of actual revenue collection and spending by municipalities per quarter against their budgeted figures. All this information feeds into the Municipal Money open local government data portal and can be accessed on: www.municipalmoney.gov.za.

In addition, the Municipal Money time series data can be accessed directly from http://municipaldata.treasury.gov.za.

A new development that facilitate transparency is the GoMuni portal which can be accessed at https://lg.treasury.gov.za/ibi_apps/signin  by clicking on the public access tab.

To improve the quality of reporting, the Municipal Budget and Reporting Regulations promulgated in 2009 prescribed new budget reporting formats for municipalities. In terms of the 2009 regulations, municipalities had to submit their 2022/23 MTREF budgets in the prescribed A1 Schedules as per the regulations.

In addition, with the implementation of the Municipal Standard Chart of Accounts (mSCOA) on 1 July 2017, municipalities must now prepare their budgets at the posting level over all segments as prescribed in the mSCOA classification framework.

All financial systems must have the facility to produce the A1 Schedule directly from their financial systems from the mSCOA classification framework.

Therefore, municipalities must put controls in place to ensure alignment of the adopted A1 Schedule to the financial system and the mSCOA data strings submitted to National Treasury. This publication is therefore based solely on the new regulated framework in terms of mSCOA.

Cabinet has called on all eligible businesses affected by the recent civil unrest in KwaZulu-Natal and Gauteng to apply for industrial loan support at zero-percent interest, under the R3.75-billion Economic Recovery Support Package offered by government.

“The Department of Trade, Industry and Competition (the dtic) and its development finance institutions – the Industrial Development Corporation and National Empowerment Fund – have put together a funding package to support various business recovery interventions. This includes the rebuilding of infrastructure, equipment, fittings for premises, stock and working capital,” a Cabinet statement said on Thursday.

The funding will help to alleviate the socio-economic challenges facing businesses affected by the unrest.

Cabinet has welcomed and endorsed the announcement by JP Morgan to provide financial and non-financial support to the tune of R340 million through the Abadali Equity Equivalent Investment Programme (EEIP).

The programme consists of Abadali Fund – a Black Business Growth Fund and Abadali Grant (R40 million).

Energy

Cabinet also welcomed this week’s gazetting of the regulations that increase the threshold for embedded generation from the current one megawatt (MW) to 100 MW.

In June 2021, President Cyril Ramaphosa announced the amendment of Schedule 2 of the Electricity Regulation Act, 2006 (Act 4 of 2006) to increase the National Energy Regulator of South Africa’s licensing threshold for embedded generation projects to allow for more private generation of electricity.

“Companies in energy-intensive sectors will now be able to generate their own electricity without the need for a licence. The new generation capacity will increase energy security by reducing reliance on the power grid and unlocking significant private sector investment.

“These initiatives will support inclusive economic growth and job creation within the small and medium-sized businesses, particularly in the manufacturing and green economy sectors,” Cabinet said.

Meanwhile, South Africa is expected to participate at the upcoming World Expo.

Cabinet approved the participation in December 2019 but the event was subsequently postponed due to COVID-19.

“The multinational event, which is held every five years in different countries, provides a large and attractive market to showcase South African goods and services to a global audience. It will be held as a hybrid of virtual and on-site exhibitions in Dubai, United Arab Emirates, from 1 October to 31 March 2022,” Cabinet said.

The dtic will next week host a media briefing to unpack South Africa’s participation at the World Expo 2020.

The Portfolio Committee on Public Works and Infrastructure will on Thursday resume a four-day public consultation programme in the Western Cape to gather public input on the Expropriation Bill.

The first leg of the hearings will be hosted by Cederberg Municipality at Cathy Johnson Community Hall.

The purpose of the Expropriation Bill is to repeal the existing Expropriation Act of 1975, to provide a common framework in line with the Constitution to guide the processes and procedures for the expropriation of property by organs of state.

The bill also seeks to provide for certain instances where expropriation with nil compensation may be appropriate in the public interest.

Committee chairperson Nolitha Ntobongwana said Parliament has a constitutional obligation to facilitate and enhance public access to the legislation-making process and to improve public participation, hence the committee resolved to visit all the provinces to garner public views on the proposed legislation.

“The intention of the public hearings is to enrich the Bill and to ensure that it is responsive to the views and needs of individuals and groups,” Ntobongwana said.

NC, FS hearings put on ice amid increases in COVD-19 cases

Meanwhile, Ntobongwana said the committee has taken a resolution to postpone hearings in the Northern Cape and Free State, as the provinces are experiencing increases in COVID-19 infections.

“After the completion of the Western Cape leg of the hearings, the committee will pause its programme until the rate of infections is under control in both Northern Cape and Free State,” the chairperson said.

She said the committee decided to hold hearings during the week and at weekends to afford many citizens and stakeholders an opportunity to participate in the hearings.

“The committee is mindful that the scheduled public hearings will take place during the Adjusted Alert Level 2 lockdown regulations and has taken due regard to ensure adherence to COVID-19 guidelines and regulations. In line with the announcement made by the President, the committee will adhere to the regulated 100 participants in a venue at any given time,” Ntobongwana said.

The programme for the hearings can be downloaded using this link: https://tinyurl.com/4drdu9ac

The National Assembly adopted the Special Appropriation Bill and Appropriation Bill during its hybrid plenary sitting on Friday.

The Appropriation Bill officially allocates money from the National Revenue Fund (NRF) to provide for requirements of the state for the 2021/22 financial year, as required by Section 213 of the Constitution and section 26 of the Public Finance Management Act (PFMA).

The national budget of R1.3 trillion for the 2021/22 financial year was tabled on 24 February 2021 by the Finance Minister Tito Mboweni together with the Bill and referred to the Standing Committee on Appropriation for consideration.

Parliamentary spokesperson, Moloto Mothapo, said the committee considered the bill and noted that the 2021/22 budget is centred on government’s medium-term policy priorities of promoting economic recovery and returning public finances to a sustainable path.

It focuses on narrowing the budget deficit while stabilising the debt-to-Gross Domestic Product (GDP) ratio by moderating spending and reducing the public sector wage bill.

“The committee further noted that while the budget shows continued exercise of restraint on spending growth over the medium term, nearly R3 trillion or 56.6% of public funds are allocated to learning and culture, health and social development. The budget also funds a free COVID-19 vaccination programme,” Mothapo explained.

The 2021/22 budget proposes an adjustment to government spending plans as follows:

• Non‐interest spending is reduced by R27.675 billion in 2021/22, R87.259 billion in 2022/23 and R149.978 billion in 2023/24 financial years. The largest share of these reductions falls on the compensation of employees;
• A proposed additional R11 billion to the spending framework in 2021/22 for the public employment initiatives. This is part of government efforts to promote economic recovery;
• An extension of the unemployment insurance benefit through the Unemployment Insurance Fund, increasing the employer/employee benefit to R73.6 billion;
• Recapitalisation of the Land Bank of R5 billion in 2021/22, R2 billion in 2022/23 and 2023/24 to be funded through reprioritisation;
• A total of R18.3 billion is added over the MTEF to manage further waves of COVID-19; and
• A total of R11 billion over the MTEF is added for payments to the New Development Bank and public entities.

Special Appropriation Bill adopted

The National Assembly also, at the same sitting, adopted the Special Appropriation Bill [B5-2021).

Section 16 (1) of the Public Finance Management Act (PFMA) authorises the Finance Minister to request Parliament to appropriate funds from the National Revenue to cover the expenditure of an exceptional nature which is currently not provided for and which cannot, without serious prejudice to the public interest, be postponed to a future parliamentary appropriation of funds.

Mothapo said the COVID-19 pandemic and the worsening economic conditions confronting the country made this Special Appropriation Bill necessary.

“The Bill proposes an additional R1.250 billion to the Department of Health for the procurement of COVID-19 vaccines, and implement a related COVID-19 vaccine research project; and R2.826 billion to the Department of Social Development to fund the extension of the Special COVID-19 Social Relief of Distress Grant.

“In addition, during the 2020 Medium Term Budget Policy Statement (MTBPS), Parliament approved a total of R10.5 billion through the Second Adjustments Appropriation Bill (B25 – 2020) to allow South African Airways (SAA) to implement its business rescue plan.

“The Finance Minister may, on request, approve any portion of the funds allocated to SAA or its subsidiary to use in another subsidiary of SAA. The Bill proposes the reallocation of R2.7 billion in 2021/22 appropriated funds from SAA to fund the financial assets of its subsidiaries,” Mothapo explained.

Following last week’s debate on the Bill, Mothapo said the National Assembly agreed to the Standing Committee on Appropriations (SCoA) reports, which recommended that the House adopts the Bills with amendments.

“The Appropriation Bill will now be sent to the NCOP (National Council of Provinces) for consideration and concurrence scheduled for 18 June 2021,” Mothapo said.

National Treasury has invited the public to submit technical tax proposals to be considered for possible inclusion in the 2021 Budget Review.

Every February, the Finance Minister announces new tax proposals that provide additional information on the tax proposals made in the Budget, as well as proposed changes to tax legislation.

More substantive tax policy proposals and rate changes are contained in Chapter 4 of the Budget Review, while the more technical tax proposals are generally contained in Annexure C of the Budget Review.

“The technical tax proposals requested in this invitation must be limited to unintended anomalies, revenue leakages, loopholes and technical matters applicable to the current tax legislation that require correction. More substantive tax policy proposals and rate changes are dealt with through a different process, and hence this request does not apply to major tax policy proposals,” Treasury said in a statement.

To ensure proper assessment, technical tax proposals should be submitted under the following headings:

Income tax – individuals, employment and savings;

Income tax – domestic business;

Income tax – international;

Other taxes – for example, value added tax, and

Tax administration legislation.

Each technical tax proposal must be explained in detail with the explanation covering the following areas:

The legal nature of the problem;

A detailed factual description; and

The nature of the business / persons impacted.

The public has until 23 November to submit the requested technical proposals.

The Treasury hold virtual workshops with stakeholders on 3 and 4 December to clarify issues raised in the submitted technical proposals, to further assist in the prioritisation of the issues raised and to obtain further information.

“The dates for the workshops will be confirmed by way of an electronic invitation to taxpayers, tax practitioners and members of the public who submitted proposals. Please ensure that correct e-mail addresses and contact information are included in the written submissions,” said Treasury.

Following the above process, National Treasury and SARS will submit recommendations to the Minister of Finance for possible inclusion in Annexure C of the 2021 Budget Review.

Treasury clarified that engagement or request for more information on any proposal before the 2021 Budget is no indicator that the proposal will be included in the 2021 Budget Review.

“The final decision to include any proposal is the sole prerogative of the Minister of Finance and no further correspondence will be entered into regarding the Minister’s decision on the proposals received.”

Finance Minister Tito Mboweni faces a tough juggling act this afternoon, when he presents the 2020 Medium Term Budget Policy Statement (MTBPS) in Parliament.

The MTBPS will be his second budget presentation since the tabling of the Supplementary Budget in June, which was in response to the economy-crippling COVID-19 pandemic. It also comes on the back of the recently announced Economic Recovery Plan.

Early this month, the Finance Minister wrote to National Assembly Speaker, Thandi Modise, requesting the postponement of the mini-budget from October 21 to today.

In a statement, Mboweni made the request having taken into consideration the complex and unusual circumstances faced by the country due to the COVID-19 pandemic, which included the tabling of a Supplementary Budget.

The Ministry of Finance and National Treasury have had to adjust the approach and consultation of the budgetary process.

Econometrix (Pty) Limited director and chief economist, Dr Azar Jammine, speaking to SAnews, said the country might see tough austerities being imposed due to the country’s recent dramatic deterioration in finances.

“That means that the Finance Minister will have to retain the kind of dramatic parameters that were incorporated in the supplementary budget in June,” he said.

The problem, however, was that in June, Mboweni forecasted economic growth of -7.1%. It appears this might be forecast further down to either -8 or -8.5%.

“That in turn means government’s revenue growth will need to be revised downwards sharply, meaning that the shortfall in government revenue is likely to be greater than what was incorporated in the supplementary budget,” said Jammine.

In addition, he said, President Cyril Ramaphosa in his Economic Reconstruction and Recovery Plan stated that the country needed to provide further relief to unemployed people and extended the relief to them.

“There is a view that the relief has to be extended beyond January as well if we are to sustain some sort of recovery because people are taking a lot of strain,” he said.

“…Under those circumstances he will have to increase the budget deficit by probably about R20 billion over and above what was budgeted for in the supplementary budget.

“That doesn’t take into account the possible extra amounts that might have to be devoted to state-owned enterprises. We are unclear on that score because President Ramaphosa spoke about attracting strategic equity partners and we don’t know what that will take into account – will it come off the budget or will we rely upon other funding sources,” the economist questioned.

While some economic analysts have argued that increasing the budget deficit could be a cause for alarm and result in a large-scale sell off of government bonds and the rand, Jammine did not agree for two reasons.

The first is that the global mood around relief packages had softened enormously.

“I think the markets will be a little more forgiving of Minister Mboweni if he does increase the budget deficit from 14.6% GDP to something like 15 or 16%. This would mean a further increase in the public debit GDP ratio,” he said.

“My expectation is that of a slight increase in the budget deficit, but that will not cause excessive and undue alarm and it will not necessarily lead to rating downgrades.”

The government’s hand in this regard had been greatly strengthened by a series of events that speak to the state finally undertaking the structural reforms that are needed to improve the growth of the economy and its ability to raise revenue.

“We’ve a huge number of cases being brought to courts to fight corruption and state capture. We’ve also seen the government announce a big infrastructure investment programme with more details than any of the other ones,” he said.

Also, the state has passed laws that allow independent power producers to produce electricity and compete with Eskom.

“We’ve seen government announcing the launch of broadband spectrum at the end of March [and] we’ve seen the government committing itself to improving the capacity of the state. All these are positive moves in the direction of structural reform,” he said, adding that rating agencies observed such developments.

Minister Mboweni will table the budget at 2pm.

The Government Communication and Information System (GCIS) has been commended for delivering on its mandate in the midst of the COVID-19 pandemic.

Parliament’s Portfolio Committee on Communications said this when the GCIS presented its special adjustment budget for the 2020/21 financial year.

The adjustment budget presented on Wednesday is in line with the 2020 Revised Fiscal Framework and the Adjustments Appropriation Bill, tabled by Finance Minister, Tito Mboweni, to the hybrid sitting of the National Assembly on 24 June 2020.

“The committee believes that GCIS is doing good work with regard to delivering on its mandate during this pandemic, and that it is doing so while ensuring good governance,” said committee chairperson Boyce Maneli in a statement.

The adjustment budget is presented in line with the 2020 Revised Fiscal Framework and the Adjustments Appropriation Bill, tabled by the Finance Minister on 24 June.

In May, the GCIS presented the annual performance plan (APP) and budget of R720.5 million for the current financial year.

However, through the special adjustment budget, National Treasury has appropriated to the GCIS an additional R60 million to strengthen government communication, and to raise awareness about the COVID-19 pandemic.

As of Wednesday, South Africa’s confirmed COVID-19 cases stood at 224 665.

The GCIS undertook to spend the additional budget as follows: R50.1 million on electronic and print media, R3.9 million on print products and distributions, and R6 million on advertising.

The committee encouraged the entity to channel an equitable share of the additional budget to community media.

It further welcomed the GCIS’s idea to procure a Sentech line for community radio broadcasts.

In May, the GCIS presented the annual performance plan (APP) and budget of R720.5 million for the current financial year.

Additionally, the committee agreed with President Cyril Ramaphosa’s determination to freeze at 0%, an increase on salaries of the chairperson and councillors of the Independent Communications Authority of South Africa (Icasa).

Auditor-General Kimi Makwetu says government cannot afford to lose money because of neglect, inefficiencies or poor decision making.

Makwetu said this when he released the report on the audit outcomes for municipalities for the financial year that ended in March 2019.

“The levels of fruitless and wasteful expenditure have also increased. At the moment, in terms of all the municipalities that were audited, they have got an amount of about R2 billion worth of fruitless and wasteful expenditure.

“And this is expenditure that is incurred in vain that could have been avoided. However, if there were no proper systems of control, some of the expenditures are picked up after they have been incurred,” he said.

According to the report, which is on the Auditor-General’s website, over the three-year period, R4.27 billion of government expenditure was fruitless and wasteful.

In total, 91% of the municipalities did not comply with legislation. The outcome is similar to the previous year and slightly higher than the 85% in 2016-17.

The report cited a lapse in oversight and lack of controls relating to compliance in a number of areas, including supply chain management.

It also pointed to a regression in the compliance with supply chain management legislation since 2016-17.

The Office of the Auditor-General remained concerned that only 2% of the municipalities were fully complying with legislation, despite all the reporting and the amount of red flags that were raised.

“The levels of unauthorized expenditure are still high, where the levels of budgets that were agreed often exceeded, either because there were no plans for some of those projects that were implemented, or the estimates that were made in the beginning tend to be much lower than the actual expenditure that has been incurred.”

Meanwhile, irregular expenditure increased to R32 billion during the period under review.

According to the Auditor-General’s report, irregular expenditure increased to R32.06 billion from the R25.2 billion reported last year.

All eyes will be on Finance Minister Tito Mboweni this afternoon when he delivers the Supplementary Budget Speech to Parliament.

The budget has been necessitated by President Cyril Ramaphosa’s announcement that government would spend R500 billion to support the economy’s resuscitation following the outbreak of Coronavirus. Mboweni will virtually deliver the budget as the country continues to observe lockdown regulations aimed at limiting the spread of the virus.

The global pandemic has seen government’s revenue plummet, with economy activity halting during the initial phases of the lockdown. During this period, government expenditure was also redirected in an effort to limit crippling ramifications on the country’s economy.

In March, the Minister announced exceptional tax measures as part of the fiscal package. These include a tax subsidy of up to R500 per month to employers for private sector employees earning below R6 500 under the Employment Tax Incentive. This benefitted over four million workers.

In April, the central bank warned that the country’s economy faced the bleak prospect of contracting by between 2% and 4%.

During this period, the South African Revenue Service (SARS) accelerated the payment of employment tax incentive reimbursements from twice a year to monthly to get cash into the hands of compliant employers as soon as possible.

Tax compliant businesses, with a turnover of R50 million or less, were allowed to delay 20% of their employees’ tax liabilities over four months, while a portion of their provisional corporate income tax payments was without penalties or interest over six months. The intervention was expected to assist 75 000 small and medium term enterprises.

Several relief funds for various sectors, amounting to billions of rands, were availed in an effort to soften the blow on every affected South African.

During this period, government also diverted funds from other government programmes in an effort to tackle the pandemic, as the State had to purchase and avail personal protective equipment, quarantine sites, medical equipment and other essentials.

Meanwhile, National Treasury has revealed that it has received a $1 billion emergency assistance programme loan from the New Development Bank.

In a statement on Tuesday, the NDB said the funding is aimed at supporting the government of South Africa in its efforts to contain the spread of Coronavirus and reduce human, social and economic losses caused by the outbreak.

“The programme will contribute to providing critical healthcare resources and strengthening the social safety net in South Africa. The positive impacts will include improving the resilience of public health sector and health emergency response systems, and facilitating socio-economic recovery,” said the NDB board of governors in the statement.

National Treasury said the two institutions are working on final technical and administrative requirements.

Final details on the loan will be published once all processes have been concluded.