Finance Minister Nhlanhla Nene has promised both a fiscally conservative mini-budget and a stimulus package in October. Nene was speaking at the Moody’s Investors Service sub-Saharan conference in Johannesburg on Thursday via a video link-up. Here are five highlights from his address.
Conservative mini-budget and a presidential stimulus package
“Fiscal sustainability must remain the focus of government’s efforts. There will be a prudent fiscal policy over the longer term.” The minister said that the government debt would stabilise at about 60% of GDP, although the medium-term target is 55%.
Nene also confirmed that President Cyril Ramaphosa will next month unveil a stimulus package to kick-start the economy which fell into recession earlier this month. Ramaphosa is also planning a jobs and investment summit in October as another response to the laggard economy.
Civil servants bust the budget; Nene promises to slim down the public service
The new public service wage agreement will slap R30.2bn onto medium-term expenditure estimates to pay for an inflation-busting state wage bill, but Nene pledged compensation ceilings for 2018. These will be achieved by severance packages and early retirement offers to the older staff in the 1.3 million civil service. The cost of the wage deal is being offset by the one percentage point increase in VAT.
SARS commission of inquiry will help improve tax collection
Tax collection was down R50bn in 2017 and it also missed the 2018 target, although by a smaller number. Nene says the Commission of Inquiry into tax administration chaired by retired Judge Robert Nugent will help identify efficiencies at SA Revenue Service to lift the revenues over the medium-term. Nene suggested that SARS will deliver above projected revenues set out in the February budget.
State-owned companies are on the mend, but ever so slowly
Nene told the conference that the state’s bouquet of publicly owned companies reflected a legacy of poor governance but they were on the mend under the assiduous glare of Public Enterprises Minister Pravin Gordhan.
Three state-owned companies – Eskom, Transnet and the Trans Caledon Transport Authority – were back in the capital markets. In the past, said Nene, the government looked to the state-owned entities to drive infrastructure, but their ability to contribute to growth had been significantly weakened. He said that no amount of fresh capital or debt was sufficient to bring the complement of state-owned companies back to a firm footing and that new models were needed.
Private sector participation
Nene revealed that National Treasury has developed a pipeline of 64 infrastructure projects that government hoped to run with the private sector in public-private partnerships.
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