Latest news with #R2.81-trillion
TimesLIVE
22-05-2025
- Business
- TimesLIVE
Budget's revenue-generating measures could affect citizens: DaVinci Institute
The DaVinci Institute has expressed concern that the budget's revenue-generating measures, especially a proposed fuel levy increase, could negatively affect ordinary citizens. Finance minister Enoch Godongwana, in his budget speech on Wednesday, announced an increase in the fuel levy for the first time in three years, set to take effect on June 4. The levy will rise by 16c/ l for petrol, bringing it to R4.01/ l, and by 15c/ l for diesel, bringing it to R3.85/ l. The fuel levy increase is expected to generate about R3.5bn to R4bn in this financial year. The business school said this will probably increase the cost of living, including food and transport. 'Yet, there is no clear mechanism to create sustainable jobs and grow the economy at the rate at which it could absorb most of the people of working age in South Africa.' It said the National Treasury's revised budget featured some cuts and lower revenue predictions due to a reduced forecast for GDP growth. The revised budget forecast an average annual spending growth of 5.4%, increasing from R2.4-trillion in 2024/2025 to R2.81-trillion in 2027/2028. 'This is a decrease from the previously proposed 5.6% growth in March, resulting in an estimated reduction of about R200bn over the medium-term three-year period. The school said government's debt service costs consumed 22 cents of every R1 of revenue. The National Treasury has reduced gross tax revenue projections by R61.9bn for the 2025 medium-term expenditure framework period, though the figures still exceed those from the 2024 medium-term budget policy statement. 'For South Africa to achieve its previous 5% GDP growth target and reduce unemployment, [there is] a need for increased foreign direct investment (FDI). 'An additional 15% of GDP in fixed investment is required to reach this growth goal. South Africa's fiscal and industrial policies must be designed to attract foreign investment. Without this the long-term economic outlook will remain constrained.' The school said there was concern about a lack of accountability in governance, particularly at local government level, to ensure the budget led to tangible economic benefits. Poor governance and inefficiencies in state institutions remained a serious concern. 'More attention must be given to the unseen cost of governance failures in key state organs.' It said preconditioned measures for accountability, transparency and spending oversight should be followed up and reported on effectively to prevent leakages in the system. The budget speech laid out bold fiscal strategies but the true test lay in execution and alignment to the medium-term development plan 2024 — 2029. 'Sustainable economic growth, tax optimisation, increased FDI and accountable governance will be essential in shaping South Africa's financial future.'
TimesLIVE
21-05-2025
- Business
- TimesLIVE
We need to put our fiscal house in order: D-G Duncan Pieterse
Despite an underperforming economy and having this year's budget challenged twice from within the same cabinet in which he serves, finance minister Enoch Godongwana still has his real GDP growth projection on the upside for the medium-term. In his budget overview, he estimates South Africa's real GDP growth to be 1.4% in 2025, 1.6% in 2026 and 1.8% in 2027. This despite the International Monetary Fund (IMF) recently slashing South Africa's GDP growth outlook to 1%. It must be noted, as Godongwana told parliament in March, that the National Treasury's domestic GDP growth figures have consistently outperformed external estimations . In the foreword to the latest budget overview, Treasury director-general Duncan Pieterse said the budget was being tabled in a difficult international environment, characterised by trade volatility and policy uncertainty. 'As global growth has faltered, South Africa's economic outlook has also weakened, with GDP expected to grow by only 1.4% in 2025. Global risk and economic weakness reinforce the need for us to put our fiscal house in order.' Pieterse said South Africa's fiscal strategy remained on course so the government could 'spend less on debt-service costs and more on critical public services'. The government still planned to stabilise debt in 2025/26 at 77.4% of GDP and Pieterse said signs of progress were already emerging. 'For the first time since the 2000s, government is consistently running a primary surplus, where revenue exceeds non-interest expenditure. In time, this growing surplus will reduce rising debt-service costs. 'These costs will consume 22c of every rand collected in revenue in 2025/26 — money that could be better spent to build fiscal shock absorbers and fund health, education and security. Structural reforms are laying the foundation for future prosperity.' He said transformative changes would make it easier for the state and private sector to invest in the critical infrastructure needed to build the economy and create much-needed jobs. 'Yet success hinges largely on a willingness to act on all roadblocks that stifle investment. This budget projects consolidated spending growth averaging 5.4% annually, from R2.4- trillion in 2024/25 to R2.81-trillion in 2027/28.' The director-general said revisions to the March 2025 budget review projections reduce anticipated revenue and spending, but departments largely retain their baselines and critical service delivery areas are protected. 'Major reforms to state spending and the budget process are also under consideration. Public spending is inefficient. Previous spending reviews have identified tens of billions of rand in potential savings from poorly performing programmes that can be redirected in future budgets.'
TimesLIVE
21-05-2025
- Business
- TimesLIVE
Health, learning, community spending scaled back
Briefing journalists before the tabling of the budget, Godongwana said fiscal consolidation was a difficult exercise which required the Treasury to get political support for its revised spending plans, which now need to accommodate the absence of a VAT hike. 'When you do fiscal consolidation, you are doing it in conditions not of your own choosing. Even looking at your own party ... it's contested, because it is a painful exercise. That's why you need political buy-in.' He said as soon as the division of revenue bill is passed by both houses of parliament, the money goes to the provinces. On whether there would be fallout due to the scaled back expenditure figures, the minister acknowledged that some state priorities could come under pressure. Godongwana said spending adjustments were limited to a few departments and the social wage remained at 61% of consolidated non-interest spending over the 2025 medium-term expenditure framework (MTEF). 'Total consolidated spending is expected to grow at an average annual rate of 5.4%, from R2.4-trillion in 2024/25 to R2.81-trillion in 2027/28. Economic development is the fastest-growing function over the MTEF period, with an average growth rate of 8.2%.' The overview said total functional allocations amounted to R6.69-trillion over the MTEF, with proposed additional spending reduced from R232.6bn to R180.1bn over the MTEF to align spending with revenue proposals while protecting frontline services. By the numbers The total social services spending programme went from R1.52-trillion in the February budget to R1.50-trillion in the latest version tabled this week. Importantly, these are rand and cents expenditure estimates where inflation is not taken into account. Expenditure targeted towards learning and culture went from R508.7bn in the February budget to R505.6bn in the May version. Basic education bore the brunt of cuts in the category, going from R332.3bn in February to R329.2bn in the May version. Spending in the remaining items under learning and culture stayed the same, in terms of rand and cents. In health, expenditure went from R298.9bn to R296.1bn, with district health services going from R131.1bn to R130.9bn, central hospital services declining from R58.3bn to R57.8bn, provincial hospital services going from R49bn to R48.5bn, and other health services decreasing from R47.5bn to R47.1bn. Only facilities and management maintenance stayed at R11.9bn in this category. In the community development category, expenditure goes from R286.6bn in the February budget to R280.4bn. While the municipal equitable share stay the same at R106.1bn and human settlement water and electrification stays at R58bn, public transport goes from R67.7bn to R63.8bn, and 'other human settlements municipal infrastructure' drops from R54.8bn to R52.6bn. Social development spending goes down from R427bn in the February budget to R420.1bn in the May version. This sees old age grant spending go from R118.8bn in February to R117.4bn, while child support grant spending declines from R93.5bn to R90.4bn. Social security funds and provincial social development spending remain unchanged at R99.5bn and R23.3bn. Spending on 'other grants' goes from R77.1bn to R77bn. The total public services expenditure goes from R78.7bn in February to R80.7bn in this week's budget overview. These reductions essentially mean the minister is reversing the provisions that the he announced in the March iteration of the budget. Public administration and fiscal affairs is the sole beneficiary of this bump in expenditure, with expenditure to go from R51.7bn as outlined in the February budget to R53.7bn in the latest overview. Peace and security go from R267.6bn in the February budget to R263.2bn, with defence and state security going from R60.8bn to R59.7bn. Law courts and prisons go from R58.1bn to R57.2bn while expenditure on home affairs drops from R15.4bn to R12.9bn. Conversely, spending on the economic development front remains at R289.8bn while spending on economic regulation, infrastructure, industrialisation, exports, agriculture, job creation and innovation all stay the same.
