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Medium Term Budget Statement

Posted by: Ibay | Posted on: December 6th, 2016 | 0 Comments

The Finance Minister Pravin Gordhan recently presented his Medium Term Budget Statement which is a three year outlook by the Treasury of government finances.

 The key statistics

  • Revenue (taxes we pay) will be R23 billion below budget for this year. This will increase the deficit to 3.4% of GDP (3.2% was budgeted). The Minister forecasts this will drop to 2.5% in the budget period
  • To cover the revenue shortfalls taxes will be raised by R43 billion in the next two years of which R28 billion will be implemented next year. The proposed carbon and sugar taxes will almost certainly be in the mix of tax increases
  • The ceiling for expenditure will reduce by R10 billion next year and a further R16 billion in the next two years. In prior years Treasury have introduced a level (ceiling) above which spend could not go
  • Inflation is forecast at 6.1% this year, 6% next year and falling to 5.9% in the final year
  • Government debt to GDP will be 45.8% this year and will stabilise at just below 48% in three years
  • GDP will grow 0.5% this year, 1.3% next year and 2% in 2019
  • Financial assistance to students will be an extra R17 billion in the forecast period
  • The freeze on government posts will remain. This is estimated to reduce government employment by 25,000 in the three year outlook
  • Ongoing supply chain measures to improve efficiencies and savings.

The Minister announced:

  • The boards of SAA and the Post Office had been reconfigured to strengthen governance and oversight.
  • The government intends to bring policy certainty to telecommunications and tourism.
  • Progress has been made with labour relations as shown by a drop in strike activity following negotiations with union leaders.
  • Ongoing supply chain savings following the introduction of a centralised procurement data base. Negotiations are under way with key suppliers to save R25 billion a year by 2019.
  • Communications with CEOs has proven successful with R1.5 billion made available to grow small business. Ultimately, the goal is to get the private sector to start investing in the economy – private sector investment is currently very low.
  • R45 billion has been set aside for industrialisation and sustainable resource management.
  • R58 billion will be invested by Independent Power Producers for new energy projects which will add 2 354 MW to the power grid.
  • Over R900 billion set aside for infrastructural projects.

These will remove impediments to growth in the next few years.

Author:  BGR Alluvium