Mboweni says he will table new budget, press ahead with structural reforms
CAPE TOWN - Finance Minister Tito Mboweni on Friday confirmed that he would soon table a revised budget to provide for Covid-19 emergency health and socio-economic relief measures and vowed to implement structural reforms in the aftermath of the crisis.
Mboweni said he would table a new budget "shortly" and that this would see him strip away "bells and whistles" in the February 2020 budget that were no longer appropriate given shifting priorities and economic realities as the country grappled with the impact of the health crisis.
In terms of the R500 billion package of health and socio-economic measures announced by President Cyril Ramaphosa on Tuesday, R130 billion would be sourced by reallocating money already made available within the existing budget framework.
The measures also foresee an additional R20 billion going to the health system and R50 billion into six months of increased welfare benefits to help the poorest South Africans weather the crisis.
Mboweni said this money could, for the moment, be found within the fiscus.
"The combined effect of these revenue and expenditure measures have naturally changed the fiscal framework. That said, for the next few weeks, many of these measures can still be accommodated within the current framework.
"I will shortly be tabling a revised budget bill to Parliament to deal with all these measures."
Mboweni told a media briefing relief measures terms of taxes would include an increase in the expanded employment tax incentive amount from R500 to R750 per employee, a skills development levy holiday of four months from May 2020 and deferring deferring the payment of excise duty on alcohol and tobacco products.
He said there would also be a postponement of some of the corporate tax measures announced in the February budget.
Mboweni clarified how the increases in social welfare grants would be distributed. In May, for one month, the grant for children who are beneficiaries of the welfare system will increase by R300. But from June, for five months, this will change in that the caregiver will receive an additional R500 regardless of the number of children in their care. He dismissed suggestions that the enhanced benefits would have to be extended for more than six months.
The minister said country's total fiscal and monetary response to the crisis amounted to an R800 billion boost for the economy, once monetary policy measures decided by the South African Reserve Bank (SARB) were taken into the equation.
"SARB Governor 10 (Lesetja Kganyago) has already unveiled a monetary and policy package. This will bring additional life into the whole financial system, and will utilise the combined balance sheet of the country in a careful but appropriate way.
"This takes our total economy wide measures over R800 billion. Let me say that again – our combined fiscal and monetary policy package is over R800 billion. This is a major fiscal and monetary policy response," Mboweni said.
The minister said the government's aim was to devise a "counter-cyclical response feeding directly into the heart of the economy" as the country was driven deeper into recession by the global health crisis.
He also promised support for the Land Bank to help the agricultural sector weather the crisis.
He echoed Ramaphosa's call for an overhaul of the economy, through structural reforms and increased manufacturing, to put it on a healthier footing once the country emerged from the health crisis.
Sectors that had become defunct as the country increasingly relied on Chinese imports would be revived, he said.
"The fiscal weakness was present going into the crisis – in particular, rising debt to GDP levels and the rapid growth in interest costs as a share of total spending, squeezing out spending on other priorities. Unsustainable state-owned enterprises are putting enormous pressure on the budget.
"The quicker we find solutions to this the better for everyone. While we are keenly aware of the need for a short-run enormous intervention, we cannot take our eye off the ball, i.e. the long-run. We must ensure that our choices do not mortgage our future."
Pressed about the nature of structural reforms, Mboweni said employers must be forced to hire South Africans for a certain percentage of positions in their workforce, then be allowed to make up the rest in immigrants.
He also touted greater regulation of informal trading to be able to tax the sector.African News Agency