Mboweni is optimistic

But finance ministers always are.
Feeling confident – Finance Minister Tito Mboweni. Image: GCIS

Finance Minister Tito Mboweni’s 2021 budget speech did not go without incident.

When Mboweni started delivering his speech, the TV broadcast of his address was seemingly switched to another channel. By the time the SABC cut back to Mboweni, the damage was already done as he was just about wrapping up.

The interruption follows reports that some SABC staff were planning to disrupt the address as a way to protest the retrenchment of about 300 people from the public broadcaster.

So far, SABC management has shown no sign of backing down but it’s not the only public entity playing hardball. Treasury has held the line on the wage bill by putting through no increases last year and only projecting to increase by 1.2% annually in the next three years.

Playing hardball

Previously, given the ruling ANC’s coalitions with organised labour, the state has been reluctant to prune public wages, despite the growing wage bill’s threat to the fiscus.

With less money going to wages it frees up the government to spend more on capital investments.

Cutting the wage bill was not the only victory.

Operation Vulindlela – a joint initiative by the presidency and the treasury – to push through economic reforms is up and running under the leadership of Deputy Minister of Finance David Masondo.

Though there has been some success in getting some reforms moving, such as getting independent power producers onto the electricity grid, Operation Vulindlela’s work is far from done.

“We will not rest until we have fundamentally altered the structure of this economy by lowering barriers to entry, raising productivity and lowering the cost of doing business,” Mboweni said.

Progress was also made in getting funding to support the development of the country’s infrastructure.

“Government has committed to a R791.2 billion infrastructure investment drive to this end. We are already partnering with the private sector and other players to roll out infrastructure through initiatives such as the blended finance Infrastructure Fund.”

Taking control

Mboweni also announced that this year National Treasury will be taking steps to bring government spending under control. This will see the finalisation of the Public Procurement Bill, which will “addresses fragmentation in procurement legislation”.

Treasury is also finalising the framework to implement zero-based budgeting – a method of budgeting in which all expenses must be justified and approved for each new period – across government.

It was not all good news as the country’s fiscal position remains precarious, despite an improvement since last year’s Medium Term Budget Policy Statement.

Record levels

Mboweni said the state’s borrowing requirement will remain well above R500 billion in each year of the medium term, and that public finances remained “dangerously overstretched”.

All this means is that gross loan debt will increase from R3.95 trillion in the current fiscal year to R5.2 trillion in 2023/24.

“We owe a lot of people a lot of money.”

Despite the challenges, there was some good news for business with the corporate income tax rate being lowered to 27% for companies with years of assessment commencing on or after April 1, 2022.

More rate cuts could be on the way.

“We will give consideration to further rate decreases to make our tax system more attractive.”

Individual taxpayer tax brackets will be increased by 5%. Mboweni said this will provide R2.2 billion in tax relief.

“Most of that relief will reduce the tax burden on the lower- and middle-income households.”

Always optimistic 

If everything goes to plan, Mboweni said this year’s budget will put SA on the road to recovery.

“This 2021 budget framework puts South Africa on course to achieve a primary surplus.”

It should be noted, however, that Treasury’s projections along with those of many a finance minister have tended to be on the optimistic side.

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It’s easy to be optimistic when you are spending other people money .

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