While Finance Minister Tito Mboweni delivered the Mid-Term Budget Speech on Wednesday 28 October 2020, all eyes were on him to decipher a way forward for South Africa in terms of economic recovery.
Especially after an unprecedented pandemic, a subsequent lockdown and multiple incidents of corruption that many struggle to keep count of.
While many different topics were covered, we want to know the main highlights and what exactly government will be spending its money on.
MBOWENI’S MID-TERM BUDGET SPEECH: MAIN HIGHLIGHTS
As the jolly finance minister, who often places a lot of emphasis on food on his Twitter timeline, made his way through the hefty speech, he outlined key allocations in an effort to recover from the devastation vested upon us by COVID-19.
Two weeks ago Ramaphosa outlined the country’s economic recovery plan. Mboweni, who referred to it, said the plan is urgent and all of us should do everything in our power to make sure the plan is executed. Here are the main highlights, in terms of figures, which emanated from Mboweni’s mid-term budget speech on Wednesday.
ECONOMIC CONTRACTION
According to Mboweni, the economy is now expected to contract by 7.8% this year, and the 2021 outlook is more uncertain.
MBOWENI ON DEBT-TO-GDP RATIO
Mboweni said government’s revised fiscal framework puts us on a course to stabilise the ratio of debt-to-GDP at around 95% within the next five years.
GROSS DEBT
The stock of gross debt will rise from roughly R4 trillion to R5.5 trillion in 2023/2024.
“The medium-term fiscal strategy narrows the main budget primary deficit from an expected R266 billion in 2021/2022 to R84 billion in 2023/2024 and we achieve a surplus by 2025/2026,” he said.
MBOWENI ON CONSOLIDATED SPENDING
“We propose consolidated spending of R6.2 trillion over the 2021 Medium Term Expenditure Framework, of which R1.2 trillion goes to learning and culture, R978 billion to social development and R724 billion to health”.
ECONOMIC GROWTH
Mboweni said government forecasts the South African economy to grow by 3.3% in 2021, 1.7% in 2022 and 1.5% in 2023.
PROCUREMENT OF ELECTRICITY
Mboweni said the way has been opened for the procurement of almost 12 000 MW of new electricity capacity to be provided by independent power producers (IPPs).
HOUSING
Subsidies of R2.2 billion will support the Social Housing Programme aimed at poor, working South Africans. A further 6.7 billion has been contractually committed to this programme and total investment for the programme will be R20 billion over the next 10 years; and
Student Housing Programme worth an estimated R96 billion is underway.
MBOWENI ANNOUNCES R350 GRANT EXTENSION
During the lockdown, cash grants were paid to over R22 million people, nearly half of the population;
Cabinet decided to extend the social relief of distress grant to the end of January 2021 and will direct R6.8 billion from the public employment programme allocation;
Mboweni, however, said temporary increases in other grants will, unfortunately, have to come to an end; and
R1 billion was also allocated for food relief to fight hunger.
EMPLOYMENT INITIATIVES
R12.6 billion has been allocated to the employment initiatives championed by President Cyril Ramaphosa.
SCHOOLS, ECD, SOCIAL WORKERS
Provincial Equitable Share is augmented by R7 billion to support jobs at fee-paying public schools and government-subsidized independent schools; and
Mboweni also allocated R600 million to employ early childhood development and social workers.
MBOWENI’S ALLOCATIONS TO NATIONAL, PROVINCIAL AND LOCAL DEPARTMENTS
The Revised Division of Revenue for 2020/2021 proposes an allocation of R806.7 billion to national departments, R628.3 billion to provinces and R139.9 billion to local government.
GOVERNMENT BORROWING
Government is borrowing at a rate of R2.1 billion per day.
STATE-OWNED ENTERPRISES: MBOWENI ALLOCATES 10M TO SAA
R3 billion was allocated to Land Bank in June. The bank will require an additional R7 billion over the medium-term to support its restructuring; and
Mboweni also announced that R10.5 billion has been allocated to SAA to implement the business rescue plan.
CORRUPTION
Mboweni said 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.
