South Africa's economy is now expected to contract by 7.2 per cent in 2020, its largest shrinkage in nearly 90 years, due to Covid-19, Finance Minister Tito Mboweni said on June 24. Photo: Twitter/South African Government @GovernmentZA
South Africa's economy is now expected to contract by 7.2 per cent in 2020, its largest shrinkage in nearly 90 years, due to Covid-19, Finance Minister Tito Mboweni said on June 24. Photo: Twitter/South African Government @GovernmentZA

Government reprioritises funds to support its pandemic response

By Dineo Faku Time of article published Jun 25, 2020

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JOHANNESBURG - The government yesterday temporarily suspended its baseline allocation by a staggering R109 billion, reprioritising funds across national, provincial and local government to support the R145bn coronavirus pandemic response.

The National Treasury said in its 2020 Budget supplementary review that R36bn of the balance had been financed through an increase in the main Budget deficit.

The Treasury said most of the reprioritisation was provided by an R80.9bn temporary suspension of baseline allocations.

It said the suspension consisted of R54.4bn in national departmental allocations, R13.8bn in provinces and R12.6bn in local conditional grants.

The biggest casualty of the suspensions included R20bn from the provincial equitable share. The Treasury said further suspensions would be considered as additional Covid-19 spending pressures emerge.

Treasury director-general Dondo Mogajane said the reprioritising was a cut of funds.

“Let us look at them as reprioritising areas. In this day and time in our history, how do we repositions expenditure to a point were we can get productive sectors in our economy move,” Mogajane said. “Cuts are negative, cuts bring resentment. We all know there are programmes in government that need to be stopped. There are programmes that will not take us out of the quagmire we are in.”

The government’s R145bn Covid-19 response is sourced mainly from within existing allocations for 2020/21.

In April, the government announced a R500bn relief package to support the economy and to provide a safety net for households and businesses to cushion the impact of restrictions on economic activity. The measures were temporary and provide support where it is needed most.

The Treasury said R40bn would be drawn down from social security funds’ cash surpluses to provide wage support to vulnerable employees due to the pandemic.

It said a total of R21.5bn had been reprioritised to public health services, of which about R16bn was for provinces and R5.5bn for the national Department of Health, inclusive of conditional grants.

The Treasury said that of the R5.5bn, R2.6bn had been reprioritised within the national department and R2.9bn in additional funds. “Allocations have been informed by epidemiological modelling, a national health sector Covid-19 cost model and provincial plans. A new R3.5bn Covid-19 component has been formed in the HIV, TB, malaria and community outreach grant,” said the Treasury, adding that additional spending on social grants was partly funded through reprioritising R15.4bn realised, because social grant payments for April 2020 were moved to March 2020, as a result of which they were accounted for in the previous financial year, said the National Treasury.

It said R25.5bn was allocated in this Budget, although the final amount would depend on the number of applications approved for the social relief of distress grant. Spending was adjusted by removing funds underspent due to delays caused by the lockdown from the baselines of affected departments.

Allocations were suspended to programmes with a poor history of performance.

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