Government expenditure will in the next three years focus on restoring service delivery and laying the foundation for higher growth, says Finance Minister Enoch Godongwana.
The Minister made this announcement while delivering the 2022 Medium Term Budget Policy Statement on Wednesday.
He told Members of Parliament that the changes to spending plans over the next three years were driven mainly by government’s decision to extend the special COVID-19 Social Relief of Distress (SRD) grant by one year, until 31 March 2024.
The fiscal framework, he said, also includes funding for the carry-through costs of the 2022/23 public service wage increases, as well as for safety and security, infrastructure investment and service delivery.
Addressing reporters during a press briefing, he said government would be implementing the 3% wage increment offered to public servants. A majority of unions had rejected the offer.
He said: “The SRD grant was introduced in May 2020 as a temporary measure to respond to the needs of the most vulnerable who were affected by lockdown measures. It has been extended several times since then”.
Discussions on the future of the grant are on-going and involve very difficult trade-offs and financing decisions, he said.
“Despite the provision made in this budget, I want to reiterate that any permanent extension or replacement will require permanent increases in revenue, reductions in spending elsewhere, or a combination of the two,” said the Minister. “This is what is meant by trade-offs: balancing the need to address one priority over another.”
Government spending
Over the next three years, the Minister said consolidated government spending was projected to increase from R2.21 trillion in 2022/23 to R2.48 trillion in 2025/26 at an average growth rate of 4%.
“The social wage, totalling R3.56 trillion over the next three years, or 59.2% of the consolidated non-interest spending, will take up the biggest share of the budget in support of poor households and the most vulnerable in our society,” he said.
The largest allocations are directed to the education, health and social development sectors.
Moreover, Godongwana said, over the next three years, spending increases would be prioritised to improve investment in infrastructure and boost the budgets for safety, security and fighting corruption.
Overall, government’s consolidated capital spending will increase, from R95.1 billion in 2022/23 to R145.4 billion in 2025/26. This excludes spending on state-owned enterprises.
Parliament building restoration
“We are working closely with the Presiding officers of Parliament to restore and rebuild our Parliament. Over the medium term expenditure framework, we have made allowance for approximately R2 billion for rebuilding our Parliament,” he said.
Meanwhile, South Africa’s economic growth is expected to slow to 1.9% in 2022.
Godongwana said this level of growth is “too low” to support the country’s developmental goals.
“Accordingly, we must take action to put our economy on a higher growth trajectory,” he said.
The projection is a significant decline from 2021’s 4.9%.
The forecast, said the National Treasury, is in response to global and domestic shocks. Growth is projected to average 1.6% from 2023 to 2025.
By the same token, Treasury forecasted headline inflation of 6.7% for 2022. It projects that inflation will decline to 5.1% in 2023.
High domestic food inflation and elevated fuel price were key sources of inflationary pressure. Food inflation this year averaged 8.5%, driven by rising bread, cereals and meat prices.
Treasury said implementing structural reforms, especially in the energy sector, remains crucial to improve the economy’s productive capacity and competitiveness.
Government plans to embark on an Eskom debt relief programme that will see it take over a portion of the utility’s R400 billion debt.
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