Cape Town – The lack of proper controls and governance at state owned enterprises has increased expenditure without concomitant turnarounds.
Finance Minister Malusi Gigaba says government as shareholder, is tired of being dragged into crises by the people it employs.
The main budget deficit, which determines government’s net borrowing requirement, will be 4.7% of Gross Domestic Product this year. This higher than anticipated deficit will continue over the medium term.
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In this context, government faces difficult choices. National Treasury warned that some government programmes will need to be eliminated, or their funding reduced. “South Africa’s stated policy aspirations and its social needs far exceed available public resources. “
Treasry warned against further tax increases in the current environment. “ Any new policy proposals, or expansion of existing programmes, should address only the most effective and necessary interventions.”
A team of cabinet minister has been appointed to develop proposals to stabilise debt over the medium term. They will be reporting to the president. Their task will also be to build investor confidence.
The good years of strong tax collections and well contained expenditure have passed.
The past two years have seen a drastic drop in tax buoyancy with collections well below budget.
National Treasury expects a tax revenue shortfall of almost R51bn and things are not going to get better over the medium term.
Figures announced in the Medium Term Budget Policy Statement show shortfalls increasing in the medium term to R69.3bn in 2018-19 and R89.4bn in 2019-20.
“This reflects slowing economic growth, but may also suggest a profound shift in the relationship between economic growth and tax collection in the years ahead.”