Cape Town – Finance Minister Malusi Gigaba plans to reduce the country’s contingency reserves from more than R30bn to R8bn in the next two years to offset revenue shortfalls and to reduce borrowing.
That means R22bn from the reserves, which are meant for emergencies and unforeseeable events, will be used by government because tax revenues have failed to match state spending.
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Gigaba revealed this in his mini budget speech on Wednesday in Parliament as one of four plans government has agreed upon to stem South Africa’s widening budget deficit, which will increase to 4.3% of GDP in 2017/18.
While the mini budget cited the drought to highlight concerns around water infrastructure and to reveal higher food inflation and lower agricultural GDP, it did not provide any plans to solve the crisis in the Western Cape.
Resolving the water crisis requires funds from the contingency reserves.
“Over the three-year spending period ahead, the contingency reserve amounts to R16bn, which is considerably smaller than it has been in previous budgeting cycles,” the mini budget states.
This diminishes government’s capacity to respond to spending risks.
“To offset revenue shortfalls and reduce borrowing, the contingency reserve has been pared down to R3bn in 2018/19, R5bn in 2019/20 and R8bn in 2020/21,” it says.
The February Budget Review allocated R10bn in 2018/19 and R20bn in 2019/20, meaning there is a R22bn depletion from this budget. No budget had been allocated to 2020/21 in the Budget Review to compare what the reserve should have been prior to the change.
With the lower reserves in mind, Gibaba was asked in a press conference ahead of his speech whether government was ignoring the water crisis in the drought-stricken province of Western Cape because it was governed by the Democratic Alliance.
“There are absolutely no political issues,” he said. “The people of the Western Cape are as South African as any other.
'Thirst to death'
“Just because the people voted for a different party to govern them doesn’t mean we need to thirst them to death – that would be irresponsible.
“The rains have come with the (mini budget),” he said. “We look forward to more rains.”
National Treasury Director General Dondo Mogajane explained that a specialised national committee was engaging with the Western Cape in order to provide the required budget to assist with the water crisis.
The City of Cape Town anticipates that its supply of municipal water will run out around March 2018.
The city approved Level 5 water restrictions, which entails a ban on all use of municipal drinking-quality water.
The city is looking into various ways to boost access to water, including sea-based desalination, water reclamation and groundwater abstraction projects.
It is also looking at ways to access money to accommodate these plans.
Some experts believe that trying to turn the water crisis around at this point will be too costly and that water may run out before plans properly get off the ground.
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