As is customary, the Minister of Finance, Mr Enoch Godongwana, appeared before a joint meeting of the Standing Committee on Appropriation, the Standing Committee on Finance, the Select Committee on Appropriations and the Select Committee on Finance yesterday to brief them on the budget tabled before Parliament.

Due to stagnant growth and a poor economic forecast, the national Treasury had to balance reducing debt, stimulating sustainable economic growth and providing income support for those in distress. Resources are also needed to fight crime and corruption. 

To incentivise investment and in line with the President’s commitment in the State of the Nation Address that the private sector should be the main driver of jobs creation, the Treasury cut company tax. Mr Godongwana said he had hoped that the Procurement Bill would have replaced the current system, but the recent court challenges and what was heard in the Zondo Commission has forced a rethink of the bill, to tighten it up to pass the test of constitutionality.

The Chief Director of the Budget Office at National Treasury, Mr Edgar Sishi, said that 54.9 % of the budget went on wages, distress grants, education, health and presidential employment commitments. This was made possible due to the tax surplus that exceeded non-interest spending a year earlier than expected and R1.2tr in tax collection. However, real domestic product growth is hovering at 1.8 over the medium term, not an ideal situation given the rising demands for resources to address poverty and unemployment.

The need to reduce the cost of service debt remain a challenge in the face of rising expenditure of public finance, driven mainly by the public sector wage bill. This continues to crowd out other government priorities.

Despite this balancing act, Dr Dion George wanted to know how the Treasury intends to deal with the public sector wage bill. The minister responded: “There can be no disagreement that in relation to our GDP, the public sector wage bill is high. I deliberately refused to take a position on this matter when I was tabling the budget because we are currently in negotiations with the unions to see how this matter can be resolved.”

Ms Dipuo Peters asked how long the state will continue supporting state-owned enterprises such as South African Airways (SAA). The minister responded: “The SOEs are useful to the extent that they meet their developmental mandate and that must be guided by the balance of evidence. If I were to be asked if SAA or Auto Pex are achieving their developmental mandate, I will have a difficulty to support that. But there are those that do and they need to be supported.”

How does your response on SAA reconcile with the recent claims that SAA will get new funding and where will that come from, asked Mr Dennis Rider. The minister responded: “All I know is that SAA is not in the budget. Treasury has received a submission for SAA funding from the Ministry of Public Enterprises. We are still evaluating it.”

Fuel price increases were raised by Mr Joe Maswanganyi, Chairperson of the Standing Committee on Finance. The minister duly replied: “The administration of the fuel levy and how we handle fuel prices need to be looked at. It’s a matter I am discussing with my counterparts from the Ministry of Energy.”

What was the rationale of decreasing company tax, did you regard this as an incentive for them to invest and create jobs? But the adverse could happen, this, contested the Chairperson of the Standing Committee on Appropriations, Mr S’fiso Buthelezi, believes that cutting company tax may end up benefiting the executives of private corporations, rather than building an inclusive economy.

The Deputy Minister of Finance, Mr David Masondo, replied: “We have done this in line with the president’s proclamation in the State of the Nation Address that it’s the responsibility of business to create jobs. Also, we have done this because major economies have reduced company taxes to attract investment due to the economic effects of Covid. We thought we should also do so because if don’t we would be disadvantaged.”

He went further: “It’s true that this may not be reciprocated as such, but we are engaging business to explain what is our express intent for doing this and what we would expect them to do in turn.”     

Regarding the burning of Parliament, Mr Dennis Rider wanted to know why the minister didn’t make any pronouncements on how the rebuilding of Parliament and its temporary housing will be funded. “We have not received any requests in that regard. If we do, we will look at them and make adjustments accordingly if need be,” was the response.

Questions were asked about the feasibility of the Basic Income Grant (BIG) in the prevailing economic conditions. The minister answered that a view on BIG has not be formed as yet. Currently, there are various forms of grants in place and these are being reviewed to determine which are most appropriate.

He went further: “If the review suggests that it should be implemented and it comes higher than the current budget allocated for grants, it means people must be prepared to pay high taxes. If we add more on our expenditure, our debt will also rise because of our tight fiscal situation.”

Abel Mputing
25 February 2022