A few highlights/lowlights from today’s mini-budget, delivered in Cape Town by Finance Minister Nhlanhla Nene.
- GDP growth estimate for ZA for this year at just 1.4%, a feeble level, and down from 2.7% estimate in February.
- Minister Nene says a turning point has been reached due to the difficult economic environment. There is pressure on the fiscus with revenue insufficient to cover our expenditure. So he is proposing a package of fiscal measures on the revenue and expenditure sides. This will have a mild dampening effect on growth in the short term
- So government is proposing a fiscal package to reduce the expenditure ceiling and boost tax revenue over the next 2 years. Savings of R22bn in 2015/16 and R30bn in 2016/17
- 2015 budget to generate extra revenue of at least R27bn over the next 2 years. It seems taxes are to rise, but no detail yet.
- Gross tax revenue for this current year has been revised down by R10bn, due to underperformance on corporate income tax, customs duties, VAT and the fuel levy – and downside risks remain.
- Government consumption spending to be moderated, and more public-private sector partnership is to be encouraged
- There will be cuts in government communication, staff freezes, spending on consultants, and expenditure on venues and catering
- Government recognises the need to shore up the balance sheets of the parastatals, but this will be funded through the sale of property, direct and indirect shareholdings in listed firms, non-strategic government shareholdings in state-owned companies and surplus cash balances in public entities.
- Private investment in parastatals will also be explored. More detail by the Feb budget
- For Eskom in particular, borrowing of R250bn over the next 5 years, supported by existing guarantees from government. At least R20bn will be raised to support Eskom through the sale of state assets. An existing R60bm government loan could be partly converted into equity. There will be more focus on cogeneration.
- If public sector wage increases outpace inflation, government is warning they will trigger a cut in social spending, or capital budgets or cuts in staff numbers
Tweets of the Day:
Ellen DeGeneres (@TheEllenShow): It’s National Pasta Day and #ClassicJokeFriday! Anyone know any good pasta jokes? A penne for your thoughts.