South Africa: Spending Cuts Hits Transport, Housing Hardest

26 February 2020

Cost pressures on government coffers has seen housing and transport expenditure become the biggest casualties in budget cuts, as the State shifts allocations to new and urgent priorities.

This, said Finance Minister Tito Mboweni, while delivering the 2020 Budget on Wednesday, restrained the availability of resources.

"Cost pressures, including new and urgent priorities, have been funded through a combination of reallocations and reprioritisations over the MTEF [Medium Term Expenditure Framework]," reads the 2020 Budget Review report.

In the report, National Treasury said despite these fiscal measures, government debt, as a share of gross domestic product (GDP), continues to increase. Debt service costs remain the fastest-growing expenditure item, at an annual average rate of 12.3%, and will increase to R290.1 billion in 2022/23.

Due to this, allocations to the human settlements sector are reduced by R14.6 billion over the MTEF period. This will result in fewer subsidy houses, serviced sites and related bulk and connector infrastructure.

The Municipal Infrastructure Grant is reduced by R2.8 billion over the same period, slowing provision of infrastructure such as water and electricity connections to poor households.

Public transport spending, according to the report, is reduced by R13.2 billion over the next three years, mainly on allocations to the Passenger Rail Agency of South Africa and the Public Transport Network Grant.

"The reduced allocation to the [Passenger Rail] Agency is mainly due to underspending in previous years, which resulted in huge cash surpluses. The agency is expected to ensure that critical investments are made to stabilise Metrorail," the Budget Review reads.

This will see planning and implementation of integrated public transport networks get suspended in Buffalo City, Mbombela and Msunduzi due to the three cities having progressed the least in launching public transport systems.

"Accordingly, there will be no allocations to these cities in the 2020 MTEF period," reads the Budget Review.

Reductions in basic and higher education infrastructure allocations amount will be R5.2 billion over the medium term. The report notes that the reductions are expected to cause revisions to infrastructure plans and delays in project completion.

Spending in the national Department of Health is reduced by R3.9 billion over the MTEF period, resulting in the National Health Insurance being phased in over a longer timeframe.

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