President Jacob Zuma and Finance Minister Malusi Gigaba. File picture: Yeshiel Panchia/Xinhua
Johannesburg - President Jacob Zuma has directed Finance Minister Malusi Gigaba to brief him this week on plans to cut government expenditure by R25billion and raise taxes by about R15bn.

Zuma said on Monday that he wanted a financially-sustainable plan for the roll-out of free education for students from poor and working backgrounds.

This comes days after the country was downgraded to junk status by S&P Global Ratings on Friday.

In a statement, he directed that Gigaba should be assisted by the presidential fiscal committee to identify concrete measures to urgently address challenges identified in his Medium-Term Budget speech.

Gigaba recently painted a gloomy picture of the South African economy, including a R50.8billion budget shortfall, rising government debt and low economic growth.

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“The president, as well as the cabinet, have reaffirmed the government's commitment to maintain a sustainable fiscal framework and ensure that a solution is found to address the roughly R40bn gap that has been identified through a combination of expenditure reductions and revenue-enhancing measures.”

Zuma said he had directed Gigaba and the presidential fiscal committee to focus on four areas in preparation for the 2018 Budget.

He proposed cuts to government expenditure by R25bn as one area of focus.

“Such proposed cuts should not be in areas that would negatively affect economic growth prospects and job creation.”

The other proposals include raising R15bn in taxes, a proposal for fee-free higher education for students from poor and working-class backgrounds, and identifying economic stimulus measures to grow the economy faster.

“President Zuma will in the coming days meet with the presidential fiscal committee to receive a progress report on the work done on the above.”

Gigaba said he welcomed Zuma's statement and that he was committed to work with the presidential fiscal committee and social partners to take South Africa forward.

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He earlier convened a Budget council lekgotla to ensure a co-ordinated approach towards the inclusive economic growth agenda.

“This co-operation and co-ordination is particularly important in a constrained fiscal environment where there is slow growth. In spite of the existence of many intergovernmental forums, co-ordination of policy, planning and implementation remains a government-wide challenge,” Gigaba said.

The lekgotla discussed the economic context of the 2018 medium-term expenditure framework, the impact of sovereign credit rating downgrades, the status of downgrade ratings and implications for spending, as well as revenue collection, among others.

Gigaba said despite the slowing growth, the responsibility of “radical” and inclusive growth remained the responsibility of all.

“Provinces play an important role in delivering on the agenda of economic development. Everything we do impacts directly or indirectly on economic development,” he added.

“Many sectors involved in the delivery of services can, in an environment of slowing allocations, make better use of existing resources to obtain better functioning with similar results through improved co-ordination, collaboration, and oversight,” Gigaba said.

Political Bureau