Minister Godongwana refuses to give in to pressure to increase govt expenditure
Finance Minister Enoch Godongwana stayed the course in his maiden Medium-Term Budget Policy Statement address on Thursday, refusing to give in to pressure to radically increase government expenditure in spite of a revenue boost.
Sars collected an extra R120 billion thanks to running commodities prices, but Godongwana used his first budget address to again commit the government to more prudent spending.
Godongwana is sticking to the line drawn by his predecessor Tito Mboweni, focusing on fiscal sustainability and enabling long-term growth by narrowing the budget deficit and stabilising the country’s R4 trillion debt.
But he said there would have to be trade-offs as not everything could be done at one time.
“Equally important is the faster implementation of structural reforms to unlock greater private sector investment, economic growth, and job creation,” Godongwana said.
He expects the economy to grow by 5.1% this year from a 6.4% contraction last year.
Growth for the next three years is expected to average 1.7% largely due to the unstable electricity supply and other constraints.
Godongwana has announced an increase of R54.9 billion in non-interest spending this year and has defended the budget as pro-poor.
“Consolidated government spending is expected to increase from R2.1 trillion to R2.24 trillion over three years,” he said.
He said any extension of the R350 social relief of distress grant beyond March next year would be for Cabinet to decide and details would come in his February speech next year.
SOCIAL SECURITY NET
Whilst those spending priorities might not include easy money for SOEs, they will encompass some level of social security safety net to mitigate the effects of poverty.
Godongwana referenced the unprecedented riots and looting that rocked South Africa in July.
As a result of those riots, the government extended the special COVID grant until March next year but the action also reopened the debate around a basic income grant with mounting pressure from some on Godongwana to start planning for one.
“These incidents expose the fragility of South Africa’s social, economic and political compound.”
But whilst promising to support the most vulnerable in society, Godongwana also acknowledged the heavy burden social grants place on the fiscus with 46% of the South African population receiving some kind of social grant.
“Details on our interventions with regards to social security net will be provided in the February 2022 budget.”
-EWN
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