Johannesburg - It starts with predictions of economic gloom, then moves on to promises of improved finances, admits to raiding the country’s piggy bank and warns public servants to earn their pay.
This is the medium-term budget policy statement (MTBPS or mini budget) and adjusted budget tabled in Parliament yesterday by Finance Minister Nhlanhla Nene.
“Without economic growth, revenue will not increase. Without revenue growth, expenditure cannot increase,” he said, explaining that economic growth predictions were now lower than those in the February Budget.
Tax revenue is down R7.6 billion on the February planning, with tax payments by companies 13 percent and VAT collections 3 percent below expectations, but those by individuals were 2 percent up.
The big expense in the adjusted budget involves paying the 10.1 percent public service salary increase.
Nene made ends meet by raiding the piggy bank of contingency reserves, which drops from February’s planned R5bn for this year to zero.
“The contingency reserves have been sharply reduced to accommodate the increase in compensation budgets and to fund critical social priorities. The R5bn contingency reserve for 2015/16 was fully absorbed by the wage bill shortfall. Projected reserves of R15bn and R45bn in the two outer years have been cut to R2.5bn and R9bn respectively,” according to the statement.
The provinces have 70 percent of public service employees, so they get most of that reserve money, but Nene warned it wasn’t enough, so they’ll have to find more themselves; provinces have already reduced staff by 10 000 this year and cut spending on non-essential goods and services such as travel and consultants.
“For the period ahead, the improvement in compensation means that there is no room for expanding government employment,” said Nene.
The wage bill increase wasn’t quite as damaging as initially expected, due to weaknesses in budget management, the MTBPS said.
The perennial problem of constrained electricity supply was raised, but there was no further funding for Eskom beyond the previously announced R23bn equity payment funded by the sale of Vodacom shares and the write-off of the old R60bn government “loan”.
There’s no clear costing yet for the nuclear power plants, but there’s a brief reference to R200m over the medium term “to support preparatory work for nuclear procurement” by the Treasury and Department of Energy.
There are no plans yet for a wealth tax, but a promise to tighten up on corporate tax avoidance and a comment that “an increase in the VAT rate remains one of the options available over the medium term to finance key elements of the National Development Plan”.
Debt costs are up on February’s projections, from R126.4bn to R127.9bn.
There’s a little more for Sanral – R301m – to compensate for the lower e-toll fees, but motorists are expected to pay the revised e-tolls.
Bumbling state-owned entities shouldn’t expect more handouts.
“Financing of state-owned companies that are responsible for growth-enhancing infrastructure investments is one thing. Relief for entities that should be self-sustaining or that have mismanaged their commercial activities is quite another.
“This remains a serious risk to the medium-term fiscal outlook. Work has, therefore, begun on a legislative framework to regulate state-owned companies and to address their governance challenges,” said Nene.
THE STAR