Budget 2023
Share

Nene: Economy at turning point

Cape Town - Finance Minister Nhlanhla Nene on Wednesday announced firm new measures to check South Africa's worsening debt outlook, warning that the country has reached an economic turning point.

The measures will include capping government spending and raising tax revenues, he said in the 2014 Medium-Term Budget Policy Statement (MTBPS), tabled at Parliament.

"In response to a worsening debt outlook, government proposes a fiscal package that reduces the expenditure ceiling and raises tax revenue over the next two years."

Nene said GDP growth was now anticipated to be 1.4% this year (2014/15), almost half of the 2.7% forecast in February.

"While growth is expected to reach three percent in 2017, this is well below the country's potential and has placed public finances under increasing pressure.

"Rising debt levels, if left unchecked, would absorb more and more of our spending," he said.

On reducing spending, Nene said government would lower its current budget spending ceiling by R25bn over the next two years.

"Government proposes to reduce this ceiling by R10bn in 2015/16, and R15bn in 2016/17."

On tax revenue, he signalled increases were on the cards for next year.

"Proposals will be introduced in the 2015 budget to generate additional revenue of at least R27bn over the next two years."

Policy and administrative reforms - details of which would be spelled out in next year's budget -- would raise revenues by "at least R12bn in 2015/16, R15bn in 2016/17, and R17bn in 2017/18".

Speaking to reporters on Wednesday, ahead of tabling his mid-term budget in the National Assembly, Nene said increasing state revenue was part of plans to put public finances onto a sustainable footing.

But asked whether this meant higher income taxes, he simply reiterated that new taxes were traditionally only announced in February.

In the MTBPS, Nene said that while spending ceilings were being lowered, the country's budget would continue to grow in real terms.

"Government will spend R4.4 trillion over the next three years."

South Africa faced a difficult economic environment.

"The consumption-led, debt-financed economic growth of recent years has reached its limits, and growth has slowed... weak economic performance has put a great deal of pressure on the fiscus, with revenue insufficient to cover expenditure.

"The budget deficit is high, debt levels have approached the limits of sustainability, and the economy is vulnerable to global volatility," he said.

Nene noted that interest payments had grown rapidly in recent years, and now absorbed more than 10 percent of the national budget.

According to the MTBPS, the 2014/15 budget deficit now totals R153.2bn, or 4.1% of GDP, and a table in the document shows South Africa's total net loan debt is now R1.588 trillion.

On structural reforms over the next five years, Nene said these would include sending the public service "back to basics".

This would see it focus on service delivery and sound financial management, as well as improving education against measurable targets, and better managing labour disputes.

Nene also announced a strict "deficit-neutral" approach to state-owned companies, including Eskom.

"Over the next two years, government will ensure that any capitalisation required does not widen the budget deficit."

Government's financial support for the electricity generator would take several forms, including "a direct allocation to the utility of at least R20bn, raised through the sale of non-strategic state assets".

This would have no impact on the budget deficit.

Nene said government would also "restrain" growth in its own wage bill, and warned that if public-sector wage increases significantly outpaced inflation, service delivery would need to be curtailed.

"Either by reducing social spending or capital budgets, or by trimming staff members."

* Visit Fin24's Mini Budget Special for all the news.

We live in a world where facts and fiction get blurred
Who we choose to trust can have a profound impact on our lives. Join thousands of devoted South Africans who look to News24 to bring them news they can trust every day. As we celebrate 25 years, become a News24 subscriber as we strive to keep you informed, inspired and empowered.
Join News24 today
heading
description
username
Show Comments ()
Rand - Dollar
19.00
-0.3%
Rand - Pound
24.14
-0.1%
Rand - Euro
20.65
-0.3%
Rand - Aus dollar
12.38
+0.3%
Rand - Yen
0.13
+0.5%
Platinum
905.16
-2.0%
Palladium
1,006.63
+0.1%
Gold
2,157.24
-0.2%
Silver
24.94
-0.4%
Brent Crude
86.89
+1.8%
Top 40
66,252
0.0%
All Share
72,431
0.0%
Resource 10
53,317
0.0%
Industrial 25
100,473
0.0%
Financial 15
16,622
0.0%
All JSE data delayed by at least 15 minutes Iress logo
Company Snapshot
Editorial feedback and complaints

Contact the public editor with feedback for our journalists, complaints, queries or suggestions about articles on News24.

LEARN MORE
Government tenders

Find public sector tender opportunities in South Africa here.

Government tenders
This portal provides access to information on all tenders made by all public sector organisations in all spheres of government.
Browse tenders