The Treasury has revised its forecast of growth in the South African economy in 2021 to 4.8% from 5.1% projected in the November 2021 Medium Term Budget Policy Statement (MTBPS) and the 3.3% forecast in the February 2021 Budget.
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“It is estimated tax revenue for 2021/22 to be R1.55 trillion. This is R62 billion higher than our estimates from four months ago, and R182 billion higher than our 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.”
More than R308 billion has been directed towards bailing out failing state-owned companies. Finance Minister Enoch Godongwana says the future of state-owned enterprises will be determined by the value they create; and whether they can function effectively without government bailouts. Eskom has been provided with over R136 billion to date to pay off its debt, with a further R88 billion until 2025/2026. “National Treasury is working on a sustainable solution to deal with Eskom’s debt in a manner that is equitable and fair to all stakeholders.”
Government debt has reached R4.3 trillion and is projected to rise to R5.4 trillion over the medium-term. This huge sum is owed to lenders domestically and around the world! It incurs large debt-service costs; averaging R330 billion annually over the MTEF. These costs are larger than spending on each of health, policing or basic education. For this reason and to support the economic recovery, in this budget we are reducing the fiscal deficit and stabilising debt. The consolidated budget deficit is projected to narrow from 5.7 per cent of GDP in 2021/22, to 4.2 per cent of GDP by 2024/25.
Over the next three years, we allocate R3.33 trillion to the social wage to support vulnerable and low-income households. This is approximately 60 per cent of non-interest spending. We have prioritized spending on the following key areas: In 2017, government announced a policy for fee-free higher education. We are announcing an additional allocation of R32.6 billion for financial support to current bursary holders and first-year students under the National Student Financial Aid Scheme. Any further shortfalls will be funded from within the baseline of the Department of Higher Education.
In this budget, we are adding R24.6 billion for provincial education departments to address the shortfalls in the compensation of teachers. An additional R15.6 billion is allocated to provincial Health departments to support their continued response to COVID-19, and to bridge shortfalls in essential goods and services. R3.3 billion is allocated to absorb medical interns and community service doctors.
R8.7 billion is added to the Police budget. The department is allocated R1 billion to implement personnel reforms. Another R800 million may be available in the following year, subject to satisfactory progress.
We are also strengthening the resourcing of the justice system and our courts. In this regard, the budget of the Department of Justice and Constitutional Development is increased by R1.1 billion, while the Office of the Chief Justice receives an additional R39.9 million.
The South African National Roads Agency (SANRAL) receives an additional R9.9 billion for maintaining the non-toll road network. Over and above this, the Budget Facility for Infrastructure has approved funding for several water projects:
• R2.1 billion is allocated for raising the Clan William Dam.
• The Lepelle Water Board is allocated R1.4 billion for the Olifantspoort and Ebenezer plants.
• The Umgeni Water Board is allocated R813 million for the Lower uMkhomazi Water Supply Scheme
The project to modernise six border posts, including Beitbridge, is at an advanced stage of preparation. Feasibility studies have been completed and a request for proposal (RFP) will be issued in March 2022.
The Department of Social Development will receive the largest allocation of R58.6 billion over the medium term for the following:
• First, to initiate a new extended child support grant for double orphans. This is to encourage the care of orphans within families rather than foster care • Second, to provide for inflationary increases to permanent social grants.
• For the 2022/23 fiscal year, the old age, war veterans, disability and care dependency grants, will increase by R90 in April and a further R10 in October. The foster care and child support grants will increase by a once off R20 in April;
• Thirdly, R44 billion is allocated for a 12-month extension of the R350 social relief of distress (SRD) grant.
We remain committed to controlling those parts of the budget that are permanent in nature, including by arresting historically rapid increases in the public sector wage bill.
Corporate income tax rate will be reduced from 28 per cent to 27 per cent, for companies with years of assessment ending on or after 31 March 2023.
Excise duties on alcohol and tobacco will increase by between 4.5 and 6.5 percent. The increases mean that as from today:
• A 340ml can of beer or cider will cost 11c more;
• A 750ml bottle of wine will be 17c more expensive;
• A bottle of sparkling wine will cost an additional 76c;
• And a bottle of spirits will be R4.83 more expensive;
• A packet of cigarettes will cost an additional R1.03;
• 25 grams of piped tobacco will cost an extra 37c; and
• A 23 gram cigar will be R6.77 more expensive.
Government also proposes to introduce a new tax on vaping products of at least R2.90 per millilitre from 1 January 2023. A new tax will also be introduced on beer powders.
After three years of no changes, the health promotion levy will be increased to 2.31 cents per gram of sugar.
The carbon tax rate will increase by R10 from R134 to R144, effective from 1 January 2022. The carbon fuel levy will increase by 1c to 9c per litre for petrol, and 10c per litre for diesel, from 6 April 2022. In line with our commitments at COP26, the carbon tax rate will be progressively increased every year to reach $20 per tonne. “In the second phase from 2026 onwards, the carbon tax rate will have larger annual increases to reach at least $30 by 2030, and the allowances will rapidly fall away.”