CAPE TOWN - The Medium Term Budget Policy Statement, which Finance Minister Tito Mboweni will present to Parliament on October 24, is getting more attention than normal this year, as individual taxpayers and businesses in South Africa worry about how the financial burden of corruption will be shared with taxpayers.
The MTBPS, or mini-Budget, as it is known in some circles offers a first glimpse of the potential tax pain awaiting us in the Budget speech in February. It is a Cabinet policy statement tabled in Parliament which sets out the economic context and assumptions that inform the following year’s budget, as well as the framework in which the budget is prepared.
It deals with big picture stuff, not the nitty-gritty that determines our future take-home pay. It’s about the economic environment, the government’s spending priorities and available resources.
For analysts and commentators, it’s an update on the state’s financial position, the likely budget shortfall and future debt issuances, all of which could affect our borrowing costs, credit rating reviews and currency movements. For everyone else it’s esoteric detail, which most of us felt we could ignore until the recent past.
For many years, our finances were in decent shape, with a modest budget deficit and low public debt levels. Tax collections routinely surprised on the up, allowing government to cut corporate tax rates and extend welfare spending.
These were the days when Trevor Manuel was at the financial helm, and Pravin Gordhan turned Sars into a productive tax-collecting machine.
Then the Global Financial Crises of 2008/09 hit and after that, the rot set in. The wrong people came into the wrong jobs and our national finances have worsened ever since, with disappointing tax revenues and rising budget deficits.
For a while, National Treasury papered over the cracks by taking on more debt and projecting stronger economic growth (which, like a mirage, always just lay ahead but somehow never materialised). Eventually, our debt to GDP ratio – only 28% in 2008 – breached 50%. Some 10% of the budget is now consumed by interest payments, money that could be spent much more productively elsewhere.
In the end, Treasury had no alternative but to shift some of the mismanagement cost on to taxpayers.
The MTBPS now provides an early indication of that additional burden. With the daily exposes about corruption at the highest levels, it is no surprise that so many South Africans fear the worst and all eyes will be on Parliament on Wednesday October 24.
Steven Nathan is the chief executive and founder of 10X Investments
The views expressed here are not necessarily those of Independent Media.
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