When the Minister of Finance, Mr Enoch Godongwana, presented the 2022 Budget in the Good Hope Chamber on Wednesday he called for caution, due to the uneven economic recovery and continuing high risk to the fiscus. Nonetheless, the 2022 budget reasserts the commitments made in the 2021 Medium Term Budget Policy Statement (MTBPS) to chart a course towards growth and fiscal sustainability.
The 2022 budget narrows the budget deficit and stabilises debt. “It also extends income and employment support to the most vulnerable, addresses service delivery shortcomings and provides tax relief,” said Mr Godongwana. However, these interventions cannot replace the structural changes our economy needs, and difficult trade-offs are required.
The world economy is expected to grow by 4.4 per cent this year, which is 4.9 per cent lower than anticipated when the MTBPS was tabled. In addition, the coronavirus continues to wreak havoc and has led to ongoing imbalances in global value chains that have limited the pace of the world’s economic recovery.
The South African economy has not been insulated from these global developments. “We have revised our economic growth estimate for 2021 to 4.8 per cent, from 5.1 per cent at the time of the MTBPS. This revision reflects a combination of the impact of changes in the global environment, along with our own unique challenges,” Mr Godongwana continued.
Commodity prices, which have so far supported the South African economic recovery, slowed in the second half of 2021, and violent unrest in July and restrictions imposed to manage the third wave of Covid-19 further eroded the gains of the first half of the year. Industrial action in the manufacturing sector, and the re-emergence of loadshedding, also slowed the pace of the recovery.
On tax collections, these have been much stronger than expected, at R1.55 trillion for 2021/22. This is R62 billion higher than what was estimated four months ago and R182 billion higher than estimates from last year’s Budget. This follows a shortfall of R176 billion for 2020/21, when compared to the 2020 Budget forecasts. “This positive surprise has come mainly from the mining sector, due to higher commodity prices.”
He said the improved revenue performance is not a reflection of an improvement in the capacity of the economy. As such, “we cannot plan permanent expenditure on the basis of short-term increases in commodity prices. To be clear, any permanent increases in spending should be financed in a way that it does not worsen the fiscal deficit.”
2022 marks the 25th anniversary of the establishment of the South African Revenue Service (SARS). “SARS plays a vital role in the economy, and we congratulate them on this momentous occasion. We also welcome the current modernisation of its infrastructure at border posts, such as Beit Bridge, to facilitate greater trade.”
25 February 2022