In what was probably one of the more anticipated Medium-term budget policy statements (MTBPS) new Minister of Finance, Mr. Tito Mboweni had several very challenging and complex matters to consider. These included high unemployment, national debt, corporate governance failures at some Government departments, especially at municipality level and at some State-owned enterprises (SOEs), as well as the risk of further down-grades of South Africa’s credit rating, to name a few.
The Minister also highlighted some of the difficult choices that Government needs to make over the next few years. In a closing comment by the Minister, he noted that South Africa is standing at a crossroad. “We can either choose to go left or to go right or to go straight on the path to nowhere... “We are choosing the road of prosperity and opportunity.”
It was an encouraging statement by the Minister, which was unpacked through some of the changes he announced. However, with an expected short-fall in the fiscus of about R24.7 billion in 2019/20 and a projected path of higher national debt, turning this statement into reality will require those difficult choices to be made and strong leadership from national Government.
From the MTBPS it is clear that the Minister wants a better, co-ordinated, approach with the private sector with the hope that through this there will be an increase in the efficiency of spend as well as the unlocking of more private sector funds into priority areas such as in infrastructure development. A closer and healthy relationship between private and public sector will most certainly contribute to a successful outcome and assist in achieving the goals of the National Development Plan.
Another welcome announcement made by the Minster is the strengthening of financial management at local government level. With the assistance of the Office of the Auditor-General and the deployment of skilled professionals, Government aims to reduce fruitless and wasteful, irregular and unauthorised expenditure, to boost revenue collection and attain Government’s developmental objectives.
The announcement of zero-rated Value Added Tax (VAT) on sanitary pads would also be a welcomed statement for various organisations and groups that have strongly petitioned for this exemption. This zero-rated announcement, with bread flour and cake flour now also included, will become effective on 01 April 2019. It is hoped that this will bring some relief to ordinary South Africans.
Changes in the global outlook and South Africa’s growth forecast now 0.7% signals that the needed recovery in South Africa might take longer than expected. With limited funds and options, and a mix of immediate and long-terms needs, it will require a skilled balancing act to ensure that South Africa’s current challenges are adequately addressed whilst finding effective ways to ensure that future generations are better equipped for the forthcoming demands without the legacy challenges troubling South Africa.
For more information contact:
Nico Esterhuizen, SAIA General Manager Insurance Risks