Our little Aloe Ferox has survived: Mboweni delivers medium-term budget speech

Finance Minister Tito Mboweni tabled the medium-term budget on Wednesday. eNCA's Devan Murugan and chief economist at IQ Business, Sifiso Skenjana, discuss the budget. Courtesy #DStv403

PARLIAMENT - Finance Minister Tito Mboweni described a concerning economic picture for South Africans on Wednesday.

But while the minister acknowledged the situation is bleak, he had encouraging words for the country.

Mboweni delivered the Medium-Term Budget Policy Statement to Parliament under difficult circumstances following the devastating global and local economic effects of the COVID-19 pandemic.

WATCH: SA's economic recovery plan unpacked

The minister unpacked the current situation and said the economy is expected to contract by 7.8 percent this year, and the 2021 outlook is more uncertain. Job losses have been particularly severe.

Mboweni said rehabilitating public finance and recovering from the pandemic is the challenge facing the country. 

The minister said the revised fiscal framework is anticipated to stabilize the debt to GDP ratio by 95 percent within the next five years.

The stock of gross debt will rise from R4-trillion to R5,5-trillion in 2023/24.

Mboweni recalled former-president Nelson Madiba's challenge to meet despair with hope and death with the reaffirmation of the beauty of life.

"You are now well aware that the country’s Aloe Ferox is drought resistant, it can survive the harshest of circumstances and can certainly withstand a pandemic," the minister said.

"Our little Aloe Ferox has survived! It is recovering!" 

The minister said a sovereign debt crisis must be avoided and expenditure must be realigned from consumption to investment.

A key element to the economic plan is the investment in infrastructure.

The minister announced the Eskom roadmap would continue to be implemented and unbundled

READ: Gordhan outlines Eskom's future plans

Mboweni announced subsidies to support social housing, saying, "subsidies of R2.2-billion will support the Social Housing Programme aimed at poor, working South Africans. A further R6.7-billion has been contractually committed to this programme. We expect that the total investment from this programme will be R20-billion over the next 10 years."

The housing programme will also serve students seeking housing. Once complete, it is estimated to benefit 300,000 students.

The Infrastructure fund will also support new projects to build and extend hospitals and develop new harbours in the Eastern Cape, KwaZulu-Natal, Northern Cape and the Western Cape.

The minister also announced various social relief packages.

READ: How to apply for the COVID-19 special relief of distress grant 

During the lockdown, cash grants were paid to over 22 million people, nearly half the population, according to the minister.

Treasury has proposed to redirect R6.8-billion from the public employment programme to the Social Relief of Distress grant, which has been extended until the end of January 2021.

The temporary increases in other grants will not be extended to 2021. The adjustments appropriation ad R1-billion for food relief to fight hunger.

R12.6 billion, in this financial year, is allocated to employment initiatives championed by President Cyril Ramaphosa.

The Provincial Equitable Share is augmented by R7-billion to support jobs at fee-paying public schools and government-subsidised independent schools.

R600-million, for the 2021 fiscal year, will go to employing early childhood development and social workers.

R2-billion is allocated to Working for Fire, Working for Water and Working for Forests.

The rest of the allocation from the employment initiative is divided between the transport, arts, sports and culture, health and agricultural sectors.

According to the minister, the government is borrowing at a rate of R2.1-billion per day.

The revised main budget deficit is now expected to be R707.8-billion.

"As ratio, of GDP, it is unchanged at 14.6 per cent of GDP. The consolidated deficit is also marginally better in rand terms, but unchanged at as proportion of GDP at 15.7 per cent," he said

READ: Debt is our weakness, says Mboweni

Mboweni cautioned that the country must be careful to avoid the fate of countries like Argentina and Ecuador that defaulted on their debt this year.

The minister announced the Land Bank will require another R7-billion in the medium-term along with the June allocated R3-billion to support restructuring.

READ: Land and Development Bank in a bid to restructure debt 

R10.5-billion has been allocated to SAA to implement its business rescue plan.

According to Mboweni, "this allocation is funded through reductions to the baselines of national departments, public entities and conditional grants. This allocation is in addition to the R16.4-billion allocated over the 2020 MTEF in the February Budget for settling guaranteed debt and interest."

The minister took time to address financial corruption, particularly loopholes in procurement procedures that have been exploited to plunder the public purse during the COVID-19 pandemic.

"The National Treasury has withdrawn the emergency procurement instruction note and required all state bodies to revert to normal procurement processes."

The South African Revenue Services is working with other law enforcement agencies to evaluate R3.5-billion worth of tenders to awarded to entities not registered for VAT.

The State Capture Commission of Inquiry has been allocated an additional R63-million from the Department of Justice and Constitutional Development to finalise investigations and produce a close-out report.

 

*Read the full speech below

Source
eNCA