(in the pic - Minister Gigaba flanked by Deputy Minister Buthelezi, SARS commissioner Moyane and DG Mogajane) Minister Melusi Gigaba delivering his Midterm Budget Speech in the National Sssembly, Cape Town. 25/10/2017, Elmond Jiyane, GCIS
JOHANNESBURG - Finance Minister Malusi Gigaba announced in his mini budget speech that a tax revenue shortfall of R50.8 billion was on the cards for the current fiscal year, despite punitive tax hikes introduced in February.

And the trend was set to continue with an expected shortfall of R69.3bn in the next financial year of 2018/19, and an even bigger shortfall at the end of the medium term framework of R89.4bn in 2019-20.

Presenting his maiden Medium-Term Budget Policy Statement (MTBPS) in Parliament yesterday (WED), Gigaba acknowledged that the government had limited options in the short term to reverse the situation. 

He also took note of a visible push back from taxpayers who are battle fatigued due to the relentless onslaught of higher taxes and higher living costs in terms of transport, food and energy.

Watch: Economists have their say on Gigaba's first Medium-Term Budget Policy Statement: 

“Compliance concerns are mounting in the context of tax administration challenges and weakening tax morality,” he said.
Given that per capita income is falling, the economic impact of further expenditure cuts or tax hikes could be counter productive, warned Gigaba.

The slow economic growth places enormous pressure on the country’s public finances as government was expected to maintain spending commitment in key areas such as education, health and social protection. 

The revised economic growth forecast from 1.3 percent to 0.7 percent is in line with predictions of slower economic growth by several institutions and economists. 

A recent Reuters poll predicted the 0.7 percent economic growth this year and 1.2 percent next year. In July, the South African Reserve Bank adjusted its forecast for economic growth from 1 percent to 0.5 percent this year and reduced the forecast from 1.5 percent to 1.2 percent. The Bank said it expected a 1.5 percent economic growth in 2019. 

National Treasury said the revisions to the forecast pointed to a “significant deterioration” in business and consumer confidence over the past year. Other contributing factors include weaker-than-anticipated growth in the fourth quarter of 2016, a large contraction in the finance sector in the first quarter of 2017 and a higher risk premium, reflected in higher bond yields, the Department said. It said the improved global growth and commodity prices partially offset the impact of domestic factors on economic growth. 

President Jacob Zuma and Deputy President Cyril Ramaphosa flanked by Minister of Finance Melusi Gigaba, Deputy Minister of Finance Sfiso Buthelezi, Sars Commissioner Tom Moyane and Finance DG Dondo Mogajane with Team Finance after Minister Gigaba delivered his maiden budget speech in Parliament. 25/10/2017, Elmond Jiyane, GCIS
“The most urgent task before our nation is to ignite inclusive, job-creating economic growth. The National Development Plan (NDP) targets sustained economic growth of 5.4 per cent per year to dramatically reduce unemployment, poverty and inequality. This year, we expect the economy to grow by only 0.7 per cent. This is clearly insufficient to achieve our development aspirations, and places pressure on our fiscal framework,” said Gigaba.

Gigaba said nuclear remained part of the country’s energy mix, in terms of the integrated resource plan (IRP). But he said at the moment, nuclear was unaffordable. He cited excess electricity capacity, saying the country had a surplus of approximately 5 700MW “which is bigger than (the) Medupi power station” .

He said “for the foreseeable future” and given the low economic growth, nuclear was unaffordable. He said, when it came to the envisaged nuclear programme, South African would proceed “at a pace and scale we can afford.” 

Meanwhile, Gigaba said infrastructure expansion, the contentious land reform issue, job creation and small business development would be some of government's expenditure priority areas in the next three years, with the government’s total expenditure expected to grow by an annual average of 7.3 percent, from R1.6 trillion in 2017/18 fiscal year to R1.9trn in 2020/21. 

(in the pic - Minister Gigaba flanked by Deputy Minister Buthelezi, sars commissioner Moyane and DG Mokgajana) Minister Melusi Gigaba delivering his Midterm Budget Speech in the National Sssembly, Cape Town. 25/10/2017, Elmond Jiyane, GCIS
Other key expenditure areas outlined by the National Treasury in the MTBPS were an integrated plan to fight crime, youth development, comprehensive social security, education and skills.

Gigaba said the department estimates infrastructure expenditure of R948bn over the medium-term expenditure framework (MTEF). 
State-owned enterprises were expected to spend R402bn of the infrastructure expenditure, with municipalities spending on infrastructure projected to be R197bn and provinces expected to spend R208bn over the MTEF.  South Africa’s education sector is expected to spend R44bn on building new school, refurbishing existing schools, libraries and laboratories. 

Gigaba said that the government had embarked on a number of new initiatives in infrastructure in order to improve the quality of infrastructure spending.  “Cabinet has approved a Budget Facility for Infrastructure which aims to overcome shortcomings in planning and execution of large infrastructure projects.”

“It has begun considering proposals in, amongst others, water, rail development, broadband, magistrate and high court construction and refurbishment,” Gigaba said.