Matthew Lester: Parliament chaos reigns, #FeesMustFall now on agenda | Fin24
 
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Matthew Lester: Parliament chaos reigns, #FeesMustFall now on agenda

Oct 22 2015 15:23

One could argue the Medium Term Budget Policy Statement of 2015 will be remembered for all the wrong reasons. The student fees protest extended to parliament, while the EFF joined in the fracas. Police force was then used to deal with the matter, as seems to be customary these days.

And with all this going on around him, Finance Minister Nhlanhla Nene delivered his speech, which was not filled with any surprises. One could argue the #FeesMustFall initiative came about too late for him to re-jig the numbers and facilitate the request for a 0% increase in university fees, some even calling for a reduction.

But this may be why it goes down as one of those days in history, as it all put education back where it needs to be, front and centre of government’s eye-line. Some even saying the scenes of today brought back heartfelt memories of the Soweto Uprising in 1976.

Matthew Lester takes cognisance of everything that’s happened and picks out his highlights from the 2015 Mini Budget. – Stuart Lowman

By Matthew Lester*

I write this while chaos reigns at parliament. I am sympathetic to #feesmustfall and only have one question ‘ how did it come to this?’

On Bruce Whitfield’s show on Monday evening he posed the question ‘ who has the most difficult job in RSA today?’ Well, if you watched Minister of Finance, Nhlanhla Nene’s Medium Term Budget Policy Statement ‘MTBPS’ in Parliament on Wednesday afternoon the answer is obvious. It’s him.

For years I have urged students to participate in the national budget process. With very limited effect. But on today they marched to parliament and the effect is staggering. #feesmustfall must now be on the parliamentary agenda. Limiting next year’s fee increase to 6% is not enough! Not by a country mile.

It would be naïve to expect that Nene could have made any substantial announcement regarding university fees. And there is practically nothing except platitude in his speech, except ‘R1.1bn in additional transfers of skills levy revenue to sector education and training authorities and the National Skills Fund.’

South-African_Parliament


Read also: Nhlanhla Nene’s Mini Budget: Financial details in a nutshell

That may help a bit. But it’s a drop in the ocean in solving the problem.

All issues mentioned in the MTBPS are important issues. Here are some of the highlights.

In the 2012 National Budget Speech, then Finance minister Pravin Gordhan predicted that GDP would increase from 2.7% in 2013 to 4.2% by 2015. Not many would have disagreed with that at the time.

No such luck.

Page 1 of the 2014 MTBPS statement read, "This year we anticipate GDP growth of 1.4%. While growth is expected to reach 3% in 2017."

And today the growth rate estimates have again been revised downwards.

The 2015 MTBPS projection is that the South African economy will grow at about 1.5% this year, rising marginally to 1.7% next year. This is considerably lower than at the time of the February 2015 budget, when 2% was predicted for 2015 and this 2.4 per cent in 2016.

Nowhere is a 4% growth rate even on the radar.

Read also: UPDATED: Mini Budget chaos as students try to storm Parliament, EFF ejected

In Nene’s own words, ’Without economic growth, revenue will not increase. Without revenue growth, expenditure cannot increase.’

This has to impact tax collections. So it comes as no surprise that gross tax revenue for 2015/16 has been revised downwards by R7.6bn this year, and by R35bn over the three-year period.

Personally I am surprised that the tax system is so robust, I expected a lot worse.

This is not news but rather a continuation of Nene’s announcements in MTBPS of 22 October 2014 ‘‘The choice we face in considering these proposals is a difficult one. But we believe that this course can no longer be postponed.’

Those few words heralded a substantial change in the tax outlook of RSA. They were an admission by National Treasury that the current tax base of RSA was insufficient to provide for the future. And that tax increases would be inevitable.

By September 2014 South Africa’s national debt trajectory showed no end. All the hopes of recovery through increased economic growth were dashed. And a new fiscal package had to be adopted.

Read also: Matthew Lester: Mini-budget loses shine. How to keep the wheels turning.

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Back in October 2014 Nene’s call was to increase tax collections by R15bn pa and decrease state expenditure by R15bn pa.

By February 2015 the numbers were revised upwards to increase tax collections by R17bn pa and decrease state expenditure by R25bn pa. And taxpayers took a knock in the solar plexus in the form of a 1% income tax hike and a 80,5 cents per liter fuel levy increase.

If there is good news from MTBPS 2015 it is the announcement that the ratio of government debt to GDP continues to stabilize. However, owing to weaker economic performance, projections of the debt level are revised marginally higher, and there is some slippage in the budget deficit compared with 2015 Budget projections.


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Government expenditure targets remain almost unchanged.

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The Adjustments Appropriation for 2015/16 include

• The salary adjustment of R1.2bn for national departments and R3.8bn for provinces is the main revision to the expenditure estimates for this year.

•_R720m for the Department of International Relations and Cooperation to compensate for the depreciation of the rand;

• R1.2bn in spending financed out of monies paid into the National Revenue Fund from departmental activities;

• R1.6bn in rollovers from unspent balances in 2014/15, including delayed payments to municipalities which had unresolved utility arrears.

I am sure that’s not going to impress students.

But here is an idea that comes from Nene’s MTBPS.

The Employment Tax Incentive (ETI) for young work-seekers continues to attract broad participation. Total claims for the incentive have amounted to R3.9bn since the start of the programme, up to the end of July 2015. It has been claimed by over 36 000 employers, for over 250 000 workers. There has been active debate around its impact. And ETI will be carefully assessed.

One has to ask the question ‘would the R3.9bn in ETI incentives not serve RSA better if it was redeployed towards solving the student crisis?’

I will write more as I go through the documents. But right now, with the chaos at parliament, I am afraid I am not really fit to write.

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