Minister of Fianance Tito Mboweni arrives in Parliament with his delegation, to deliver the Budget Speech 2021.On his deligation is thge deputy minister David Masondo and Director General Dondo Magajane. Photograph : Phando Jikelo/African News Agency(ANA)
Minister of Fianance Tito Mboweni arrives in Parliament with his delegation, to deliver the Budget Speech 2021.On his deligation is thge deputy minister David Masondo and Director General Dondo Magajane. Photograph : Phando Jikelo/African News Agency(ANA)

Mboweni gets tough on overspending by government departments

By Siyabonga Mkhwanazi Time of article published Feb 24, 2021

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Durban - Finance Minister Tito Mboweni has delivered a tough budget with cuts across some of the departments to balance the books of the state.

But Mboweni said R10 billion was set aside to procure vaccines to tackle the Covid-19 pandemic.

This comes as the government had announced measures to increase the procurement of vaccines to reach herd immunity by the end of the year.

The latest data from the US has also found that the Johnson & Johnson vaccine was 64% effective against the South African variant.

Mboweni said this was not an austerity budget.

The budget saw a number of cuts in social development, police and education.

He said there will be no tax increases and the government wants to stabilise debt in the next five years.

“I requested tips from the public to help craft this Budget. Many tips spoke about the limits to increased taxation. We agree that tax increases must be kept to a minimum as we stabilise our public finances. We have chosen not to introduce the R40 billion in tax measures initially proposed in the October Medium Term Budget Policy Statement (MTBPS). With this framework we provide the budget for South Africa's vaccination campaign. This campaign allows us to emerge from the restrictions to economic activity. We are allocating more than R10 billion for the purchase and delivery of vaccines over the next two years. We increase the contingency reserve from R5 billion to R12 billion to make provision for the further purchase of vaccines and to cater for other emergencies. With this framework we are on track to achieve our goal of closing the main budget primary deficit. We shall achieve a primary surplus on the main budget in 2024/25. This important achievement will coincide with the end of this sixth Parliament. Most importantly, we will stabilise government debt at 88.9% of GDP in 2025/26 and the ratio will decline thereafter. This is a significant improvement to the framework we presented in October last year and creates a sound platform for sustainable growth,” said Mboweni.

In his speech Mboweni did not mention the bailout of state-owned entities.

But the budget review showed that Eskom has been apportioned R31.7 billion and SAA allocated R4.3bn.

Opposition parties decried that there was no need for more bailouts.

Mboweni said in his address, the Land Bank would be given R7bn.

State-owned entities have received bailouts of more than R500bn.

In the past, the National Treasury has warned they remained a fiscal risk.

Mboweni also announced an increase in social grants. The government currently has 18 million people who receive social grants. The majority get the child support grant.

The minister said the R350 social relief grant for the unemployed would be extended until the end of April.

Previously, the Department of Social Development has said more than 6.5 million people had received the R350 grant.

Mboweni also announced an increase in sin taxes.

The National Treasury has projected that the economy will rebound this year, following a decline during the lockdown.

Mboweni said the economy will grow by 3.3% after it contracted by 7% last year.

This was due to the establishment of new business enterprises.

Mboweni said, despite the poor economic performance, the deficit is expected to decline from 14% to 6.3%.

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