OCTOBER 2019 – SOUTH AFRICA
MEDIUM TERM BUDGET STATEMENT
It is important that employers note the following:
South Africa Medium-Term Budget Policy Statement 2019
The Minister of Finance, Minister Tito Mboweni, delivered the Medium-Term Budget Policy Statement on Wednesday, 30 October 2019.
Fiscal goals and projections for the economy, as well as the risks facing the country were addressed.
- Economic growth is forecast at 0.5% in 2019 compared to the 1.5% expected in February. Growth is projected to slowly rise to 1.7% in 2022.
- E-tolls are here to stay, and the government plans to enforce compliance
- Total revenue shortfall for 2019-2020 will amount to R52.5 billion compared with the 2019 Budget estimates. This could result in job losses, lower wage settlements, smaller bonuses and a decline in income tax collection.
- Tax collection is expected to total R1.37 trillion this year, which is R53 billion (or 4%) less than expected.
- National debt exceeded R3 trillion. It is expected to rise to R4.5 trillion over the next three years. Without any policy adjustments, debt will most likely exceed 71% of GDP by 2022/2023.
- The National Treasury, in partnership with the Department of Public Enterprises, is instituting a series of measures to instil discipline in Eskom’s finances. Debt relief will only be considered once operational efficiencies have been achieved.
- The consolidated budget deficit averages 6.2% of GDP over the next three years.
- Regarding economic growth, the current account deficit is expected to remain at 3.5% of GDP over the next three years, reflecting low import growth due to weaker domestic demand.
- Almost half of all projected spending is allocated to social grants, education and healthcare, which will receive R3 trillion alone over the next three years.
- The rollout of the National Health Insurance (NHI) Bill will require an additional R33 billion annually from the 2025/26 financial year. Treasury and the health department are still in discussions around NHI.
- Luxury expenses are being withdrawn from politicians. This includes salary freezes, cuts in taxpayer-funded cars, clamp downs on expensive phones, no more business class flights and restrictions on travel and subsistence expense claims.
- R2.3 billion will be allocated to fighting crime and tax avoidance.
- The South African Reserve Bank will not be nationalised as it kept inflation stable during a difficult period. The bank also declared a substantially increased profit share to the government.
- The official unemployment rate has increased to 29%, up from 27% a year ago.
- The mid-term Policy Statement does not include detailed spending plans or tax proposals. This will be announced during the annual Budget Speech in February 2020.
To view the Medium-Term Budget Policy Statement (MTBPS), follow the link
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