MIDTERM BUDGET SPEECH: WHAT YOU NEED TO KNOW
Three out of 10 – that is how much OUTA’s Wayne Duvenage gives Finance Minister Enoch Godongwana for his gloomy midterm budget speech. The minister announced financial cuts to many important programmes, but did not cut politicians’ benefits. And the country’s debt has reached a shocking new high. Here’s what you should know about this year’s MTBPS.
Overall, the MTBPS reveals a mixed economic outlook with budget cuts and unclear strategies. It highlights the need for transparency and responsible financial management in addressing these challenges effectively.
OUTA can only wonder what happened to National Treasury's efficiency reviews and the promise of zero-based budgeting. The MTBPS spending cuts, some of which we mention below, seem devoid of focused efforts for better value, appearing as mere reductions in expenditures. The minister repeated President Ramaphosa’s earlier promises of the "reconfiguration" of departments and entities, but no details were shared.
It was no surprise to learn that government spends a staggering R354.5 billion (R14 billion more than was projected for 2023/24 year) on debt-service costs, with a mere R260.9 billion going to the Department of Social Development (the second biggest expense according to the budget.)
Spending more on debt means having less to spend on other areas of the budget. Crucial areas like education and health face significant budget cuts. Health loses R1.561 billion, amongst others. Some of the cuts involved moving money around within departments.
In education, R1.6 billion was cut from the Education Infrastructure Grant, R260 million from the School Infrastructure Backlogs Grant, and R2.55 billion from the university funding budget. (R2 billion of that was cut from NSFAS loans and bursaries – also see our story on NSFAS corruption here.
The National Prosecuting Authority (NPA) will lose R36 million and the Special Investigating Unit (SIU) R15 million.
As far as state-owned entities (SOEs) are concerned, there is no bailout (yet) for Transnet or Prasa, two entities heavily impacted by state capture. Prasa does get an extra R3.5 billion for “other capital programmes”, but this is in part funded by cuts in Prasa’s budget meant for the refurbishing of Metrorail and mainline service coaches (R1.610 billion and R190 million respectively).
When it comes to Transport, R638 million is moved from Sanral’s budget for non-toll roads to the Gauteng Freeway Improvement Project (GFIP). There’s still no clarity on the e-toll situation, or any explanation for the Sanral debt, the GFIP share of it or what’s been paid off. Road maintenance is cut by R567 million, and the Public Transport Network Grant by R600 million.
Even more gloomy than the economic outlook is the government’s failure to grasp the need to cut frivolous, corrupt, unproductive or inefficient spending, or possibly even to recognise it.
We note a lack of consideration for cash-strapped citizens, many of whom are unemployed. Furthermore, there's a controversial R6.227 million "leave gratuity" payment to former deputy president David Mabuza, known for extended absences from office.
While challenges persist, there are a few positive developments in the budget. The extension of the Social Relief of Distress Grant, increased funding for SARS, and additional funds for provincial governments show promise. We also appreciate the tightened conditions for the Eskom bailout.
Godongwana did address the critical issue of water provision and management, as well as wastewater. He announced plans to revise grants and grant conditions, aligning them with the Green Drop, Blue Drop, and No Drop assessments, which will hopefully improve water service performance.
However, still on the topic of water and wastewater, OUTA is concerned about the following three grants specifically mentioned by the minister as crucial for water and wastewater management:
• The Urban Settlements Development Grant to municipalities faces a cut of R553 million.
• The Integrated Urban Development Grant remains the same.
• The Municipal Infrastructure Grant sees a significant cut of R1.173 billion.
These reductions raise questions about how effectively water and wastewater challenges can be met. The City of Johannesburg, facing water delivery issues, has experienced cuts in six out of seven grants from the national government. While the intent is to enhance basic infrastructure, the cuts raise doubts. Is national government genuinely prioritising water and sanitation infrastructure? Or is it just a case of the City of Johannesburg's management's ability to utilise the grants effectively, leading to National Treasury's intervention.
Election hints emerge, with an extra R15 million allocated for Presidential Imbizos. Home Affairs secures an additional R300 million for the Represented Political Parties Fund, nearly doubling its budget. This funding is primarily for parties already represented in legislatures, potentially favoring incumbents. We hope these payments go to parties with proper tax compliance.
Godongwana mentioned forthcoming tax measures set for implementation in February to raise an extra R15 billion, but what form this will take remains to be seen.