Finance Minister Tito Mboweni once again had the nation’s undivided attention as he delivered the Covid-19 emergency budget speech. This budget speech which is ironically taking place exactly 90 days into lockdown, comes against the backdrop of sovereign credit downgrades by rating agencies, painstakingly slow economic growth, waning investor confidence and the detrimental effects of Covid-19 to the economy and the world at large.
Expectations were that approximately R130 billion of an expected R500 billion relief fund for businesses and individuals struggling to survive would come from money already allocated to departments in the initial now null and void budget speech in February along with R95 billion of new money through various loans.
Here are some of the key points that came out of the speech:
- Projected consolidated budget spending, including debt, will exceed R2 trillion for the first time ever.
- Gross tax revenue for April and May is already behind R35.3 billion on earlier projections.
- The consolidated budget deficit will almost double to R761.7 billion or 15.7% from what was projected in February.
- A proposed R34.1 billion in additional Covid-19 related spending in healthcare and on the frontline.
- An additional R5 billion for education in order to assist in making up lost time during the lockdown as well as social welfare support.
- An additional R25.5 billion allocated to the Social Development Department to support the most vulnerable and destitute via the Special Relief of Distress grant.
- The economic support package has set aside R100 billion for a multi-year response to the increasing unemployment problem which has peaked at 31%.
- The government has proposed to narrow the deficit and stabilise debt at 87.4% of GDP (gross domestic product) in 2023/24.
- Tax measures of R40 billion over the next four years will also be required and will be proposed in the 2021 budget.
- The Land Bank will be allocated R3 billion as it holds 29% of our agricultural debt.
- Special mention was made of investing in the infrastructure inSouth Africa, which is seen as a way of increasing growth and assist in increasing GDP. Government has already committed R100 billion to the Infrastructure Fund.
The main principle that can be taken from the supplementary budget speech is one of moving forward and being resilient in the arms of adversity, spending to create infrastructure and create employment but at the same time being aware that we will need to tighten the reins as eventually all loans and debt will have to be repaid.
We leave you in closing with words from our president:
“Let us put shoulder to the wheel and turn this adversity into opportunity. Let us reimagine and repurpose our economy and put it firmly on a solid and sustainable path.”
Wise words for the unprecedented times we find ourselves in, as South Africans and global citizens.