26 October 2022
The Medium -Term Budget Policy Statement (MTBPS) provides the nation with a policy perspective and direction of where public finances of the country will be focused over the next 12 months.
We stated as ANC Parliamentary Caucus during the Budget, that the country needs to build resilience to the economic challenges we face and the choices we make must provide the people with the confidence that the quality of their lives is going to change for the better.
Public Finances which the finance policy must address what we have defined as our greatest challenges, the need to build a resilient economy that provides growth and development, creates jobs, is inclusive, addresses deepening poverty and provides resources which can address income inequality. It is through this economic lens that we view the 2022 MTBPS.
The economic risks we face are both global and domestic. The MTBPS has outlined the global challenges and the prospects of a global economic slowdown both in 2022 and in 2023 and the dependency of the economy on international capital flows which in itself is a risk.
We agree with the MTBPS that we have to have rapid job-creating growth in the economy and that we have to deal, as we have repeatedly stated as the ANC Caucus with the structure and structural constraints of the economy.
This means alignment of macro economic policy with growth enhancing reforms. We concur that addressing the unreliable supply of electricity, inefficient ports and rail networks, crime and corruption, weak state capacity and high levels of market concentration which act as a barrier to growth and the emergence of small businesses as outlined in the MTBPS must be our priority.
The overarching concerns of the MTBPS as it correctly articulates, is the Budget that has to address the infrastructure backlogs, accelerate the construction of damaged structures and installations, fight crime and corruption and improve education outcomes and health outcomes. A combination of all these is drawing the economy back.
We welcome over the Medium Term, that consolidated spending on infrastructure rises by approximately 70% over the Medium Term, the fastest growing expenditure item and this will certainly build strength in the economy, covering roads, bridges, storm water systems and public buildings.
We do share the concerns of the MTBPS in this regard that unless there is efficiency and capacity in expenditure the real impact of this huge increase over the medium term will not be felt. In this regard we are concerned that both the private and state sectors investment have declined.
The task that the MTBPS calls for is to leverage more fixed investment. We agree. In this regard, the MTBPS lays out a clear path over the medium term on how it envisages drawing in private sector investment.
With regards to public sector investment, State Owned Enterprises have a critical role to play in supporting the economy and influencing investment and the provision of economic goods and services.
With regards the domestic economic outlook, the MTBPS expects GDP growth of 1.9% in 2022 and over the next 3 years 1,6%. Our own economic analysis has stated that growth of 1,6% is not going to reduce unemployment substantially neither will it reduce poverty. In fact, poverty will deepen. As the MTBPS correctly states that this level of growth is too low to support the developmental goals of government.
In addressing this the MTBPS calls for growing an inclusive economy, dealing with the structure of the economy, industrial policy to boost manufacturing and strengthening capability and capacity in the State.
On energy security, which concerns all South Africans, we note what we already know, the policy and regulatory changes designed to provide more megawatts of capacity, a process in which, as we have argued in Caucus, Eskom itself should equally be involved in renewables.
On strengthening State capability, we agree with the MTBPS that strengthening state capability is a condition for economic growth. We note the fiscal deficit and the approach of the MTBPS to continue using fiscal consolidation to reduce debt service costs, which are going to be higher for this financial year than predicted at the time of the Budget in February 2022 by almost R6 Billion.
Whilst we note that the deficit will reduce, through fiscal management but our target should not be a primary fiscal surplus, given the level, extent and depth of challenges we face at a socio-economic level.
On revenue, we celebrate that revenue collections have exceeded projections due to improvements in corporate tax incomes. It is these that have allowed for the narrowing of the deficit and restore the financial baseline of government departments and contributed to addition to infrastructure projects, education, health and policing.
We note as well that the public service wage bill will also be funded out of the higher than anticipated revenue income.
On the matters of Parliament, we welcome the R118 million in the Adjustments Appropriation Bill to deal with relocation costs and preparations for the rebuilding of the National Assembly Wing and Old Assembly Wing.
Over the Medium-Term Expenditure Framework we also welcome the approximately R2 billion to rebuild Parliament.
On Expenditure, we welcome the provision for the extension of the Social Relief of Distress grant until March 2024, R2 billion allocated to provide relief to 7.4 million people. We note that no decision has been taken on the future direction of the grant and that this will be the subject of further discussion in particular at the ANC’s 55 National Conference in December.
We further welcome the increase for safety and security and infrastructure investment as part of the growth in government expenditure over the medium term at an average growth rate of 4%.
We note that the social wage over the next three years will be 59% of consolidated spending and takes up the largest share of the budget.
This amounts to a social wage of R3.5 trillion over the next three years, providing much needed support for poor households. The largest allocations are directed to the education, health and social development sectors.
On the Division of Revenue and funding of Local Government we are conscious that funding going forward will be informed by the diagnostic review of local government capacity. There is over the medium term growth in expenditure to local government moves from R154 billion to R183 billion. Most welcomed is additional funds to support free basic services to poor and indigent households, electricity and water.
On State Owned Enterprises we welcome that the increased revenue will be used to assist by recognising and realising their potential to contribute to the economy. In this context we support the Special Appropriation Bill to provide additional funding to Denel to stabilise the entity, Transnet for locomotives, and SANRAL to bring to an end the Gauteng Freeway Improvement Project debt, with National government paying off 70% and Gauteng province 30% of the debt.
We further welcome that in the interest of Eskom’s long tern financial stability, government will take over a significant portion of Eskom’s R400 Billion debt.
We welcome the provisions of the MTBPS with regards fighting crime and corruption. These funds are designed to strengthen systems and mechanisms.
This includes taking forward recommendations of the Commission of Inquiry into State Capture through the provision of additional funding for the Department of Justice.
For the economy to grow we need a stable society and fighting crime therefore remains a priority. In particular and following intervention by Parliament we are pleased to see that additional resources to the security forces are provided for in the MTBPS.
Over the medium term more funding is provided to peace and security to increase the number of police (15 000), boost the investigation and prosecution of serious crimes and safeguard South Africa’s borders and seas.
We welcome the achievements acknowledged in the MTBPS of the results of regulatory and enforcement agencies in tackling crime and corruption and the additional finances to the National Prosecuting Authority, the Special Investigating Unit the Financial Intelligence Centre and SARS.
In conclusion the ANC Parliamentary Caucus will progressively engage further in developing the implications of the MTBPS between now and the 2023 Budget and beyond.
Issued by the Office of the Chief Whip, Hon. Pemmy Majodina
Advisor to the Chief Whip
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