Treasury finds R36.2bn but SA’s fiscal situation remains serious

Taxpayers must be up to date with compliance before asking for assistance.

At the National Treasury press briefing on the economic support package required to deal with the negative economic impact of the “recent disturbances”, Finance Minister Tito Mboweni gave assurance that the fiscal path announced in the 2021 February budget will be maintained.

Mboweni warned that South Africa’s fiscal situation remains serious. The debt burden has surpassed 80% of GDP and it takes R1 out of every R5 raised in taxes to pay the cost of the debt. “The relief package has been “carefully financed to avoid further damage to the public finances”.

National Treasury has been able to cover the massive R36.2 billion relief package due to strong revenue takings in the first quarter, and by reprioritising other support measures. This is on top of the existing pressures on the fiscus, such as the public sector wage bill and the cost of the Covid-19 vaccination programme.

Finer details will be announced at the time of the Medium-Term Budget Policy Statement (MTBPS), due in October.

Due to the significant negative impact of the pandemic and accompanying lockdowns, National Treasury projects that the South African economy will only return to pre-Covid levels (that is, the level in the last quarter of 2019) in 2023.

Mboweni made some interesting suggestions:

  • That “we must relook at [state-owned insurer] Sasria”, and reimagine or repurpose it. “This is an ideal opportunity to do this”.
  • The issue of grants should be debated. Should there be a quid pro quo process, in other words, “work for a grant”? Mboweni in his statement said: ‘’Much work is still being done in this area, and additional borrowings to fund a consumption grant are not supported.

Communities must take responsibility

Mboweni said that at the end of the day, it is up to the communities to take responsibility: they know who the looters are.

In reply to Moneyweb’s question on how communities can take responsibility, Mboweni said that government does not support vigilantism, but the communities know who the thugs are, and the violent ones. “The community must ensure that there is order” by reinvigorating street committees and working with police stations, schools and sporting associations.

“We can take peaceful means to stabilise our communities.”

Mboweni also suggested that the relationship between the municipalities and the communities should be looked at, for example, what they can do about cleaning up the community and paving the roads.

Tough love

Sars Commissioner Edward Kieswetter said the good revenue take for the first quarter of the year “augurs well for us”. But he warned that taxpayers must be up to date with compliance before they ask for assistance.

Mboweni added that “it is difficult for us to support businesses who were not good corporate citizens”.

Fiscal relief package

National Treasury Director-General Dondo Mogajane gave assurance that the fiscal relief package of R36 198 million could be funded from revenue and the reprioritisation of measures, and that it will not be necessary to increase borrowings.

Breakdown of the fiscal relief package (Rm)
Fiscal response measures33 850
– Social relief of distress grants (SRD)26 700
– Sasria “may be revised as events unfold”3 900
– Support for businesses not covered by Sasria2 300
– Additional funds for defence (SANDF)700
– Additional funds for police (SAPS)250
Proposed baseline reductions-2 652
– Reprioritisation-1 652
– Reprioritisation from dtic and Small Business-1 000
Increase in spending ceiling31 198
Revenue measures – employment tax incentive (Ters)5 000
Financed through additional revenue collection36 198

Budget process

The proposed spending measures will be implemented according to the budget process:

  • The contingency reserve funds under the 2021 Appropriation Act will be released.
  • The R350 social relief of distress grant has been temporarily reintroduced per the Public Finance Management Act (PFMA).
  • The tabling of a Special Appropriation Bill in parliament for the remainder of the package which is not covered by the legal limits of Section 16 of the PFMA.
  • Further details will be published in the Taxation Laws Amendment Bill and the Tax Administration Laws Amendment Bill.

Mboweni concluded the briefing by saying: “Our country continues to sail through stormy seas and we are patently aware of the difficulties faced by many South Africans.

“We will persevere to keep the ship on course and to support those in dire need.”