Finance Minister, Tito Mboweni’s maiden speech reveals a major increase in the gap between revenue and expenditure that has been caused primarily by the Eskom financial crisis.
The Eskom crisis is only partly being dealt with by allocating bailouts of R23 billion each year over the medium-term totaling R69 billion. This will kick the can down the road until after the May General Election when we expect a more substantial funding of Eskom to be announced in the 2019 Medium Term Budget Policy Statement (MTBPS).
Economic growth for the 2018 year has been maintained at the 2018 MTBPS projection of 0.7% but the outer years have been revised down in 2019 from 1.7% to 1.5% through to 2021 from 2.3% to 2.1%.
For the first time post 1994 the debt to GDP level is predicted to breach the 60% level at 60.2% in 2023/24. This the tenth year in a row that the debt stabilisation has been pushed out by a further year and makes a mockery of the annual commitments from various ministers of finance to stabilise debt.
Tax revenue shortfall has grown from R27.4 billion in the 2018 MTBPS by R15.4 billion to R42.8 billion.
Whilst the Minister asserts that there will be no income tax rate increases the lack of any inflation-linked increases in personal tax brackets is effectively an income tax rate increase that will raise an additional R12.8 billion.
Another effective tax increase is the failure to give an adjust the medical tax credit for inflation and will raise an additional R1 billion in tax revenue. This will be very hard on pensioners particularly those on a fixed income.
As we predicted the Fuel levies will be increased by 29 cents/lt on petrol being 15 c/lt increase in the general levy, 5 c/lt on RAF and 9 c/lt in the form of a new carbon tax.
The expenditure ceiling has been increased by R16 billion which increases the 2019/20 deficit from 4.4 % in the 2018 MTBPS to 4.7% in the 2019 main budget. Another solution must be found to deal with the Road Accident Fund losses in place of continually increasing the fuel price.
What would on the surface appear to be a robust statement that the public sector wage bill is unsustainable and the move to reduce the public sector wage bill by R 27 billion over the three years relies solely on natural attrition together with an early retirement program seemingly to be partly funded by the Government Employees Pension Fund (GEPF).
This attempt to reduce the public sector wage bill will not make a meaningful reduction and is clearly an indication that a negative reaction from the unions is feared if the required reductions in the wage bill were to be seriously addressed.
By sleight of hand the bailouts for SAA, SABC, Denel and other failing SOE’s has been placed in the provision of a R13 billion contingency reserve. There is no doubt that these SOE’s will be bailed out and it is disingenuous to camouflage them in the contingency reserve.
The Minister again asks the question of whether we need the failing SOE’s but then goes ahead and provides for their bailouts.
The Minister has made a valiant effort to produce a budget that meets the demands from multiple players but which in the end effectively kicks the main issues to touch till after the May 2019 election and probably into the lap of yet another new finance minister.
Ultimately, this budget is dominated by bailouts to failing SOEs and will do nothing to ease the lives of ordinary South Africans.
Alf Lees is the Shadow Minister of Finance for the Democratic Alliance