29 October 2009
The Medium Term Budget Policy Statement (MTBPS) Highlights
- Medium term priorities for government
- Adjustments to the 2009/10 budget framework and appropriations
- Focus for the next three years
- Medium term priorities and the fiscal framework
- Medium Term Expenditure Framework (MTEF)
The MTBPS presents the framework to deliver on the priorities of government, which are to create jobs, enhance the quality of education, improve health outcomes, enhance rural development and fight crime and corruption.
Revised revenue projections
Consolidated budget revenue is expected to total R658 billion in 2009/10, a considerable decline from the February estimate. Overall, tax revenue is expected to be some R70 billion less than the February budget projection.
2009/10 expenditure and the borrowing requirement
- Consolidated government expenditure will rise by 35% of the gross domestic product (GDP) from R715 billion last year to an estimated R841 billion this year.
- Projected expenditure is expected to increase by R127 billion, while revenue will decline by R34 billion.
- The consolidated budget deficit will amount to R184 billion in 2009/10, or 7,6% of GDP.
- The overall public-sector borrowing requirement this fiscal year will increase from R89 billion last year to R285 billion.
The adjustments include some R562 million in additional expenditure associated with the new national government structure and functions, including R250 million for rural development responsibilities.
Adjustments to the 2009/10 appropriations
The adjusted expenditure level for this year is R14 billion more than the February budget estimate. Some of the main changes include:
- “rollovers” amount to R1,5 billion, mainly for infrastructure and building projects
- a total of R16,4 billion in unforeseeable and unavoidable adjustments of which R12 billion will pay for higher-than-budgeted salary adjustments
- allocations are also made to assist municipalities to meet various emergencies
- municipalities will receive R509 million more to meet the increased cost of electricity supply to poor households
- R200 million for the SABC to meet short-term liquidity requirements
- R900 million for the Department of Health to take account of the increased uptake of the HIV and AIDS treatment programme
- a R1-billion recapitalisation for the Land Bank
saving of R1,5 billion has been declared on the Defence Vote, associated with delays and foreign-exchange cost adjustments in defence procurement programmes.
- GDP is expected to be 1,9% lower than in 2008, growing to 1,5% in 2010, and ultimately to 2,7% and 3,2% in 2011 and 2012 respectively.
- Exports and impost have declined by 20% in volume terms, but are expected to recover by about 4% next year.
Balance of payments
- Because the country imports more than it exports, the deficit on the current account of the balance of payments will be about 5% of the GDP, rising in the medium term.
- Official reserves have reached US$40 billion.
Inflation and monitory policy
- Consumer price inflation exceeded the target range of 3% to 6% in the last two years.
- Inflation targeting has assisted in lowering inflation expectations.
Proposed changes include:
- increases in the Rand thresholds applicable to outward investments by South African companies
- removal of various restrictions on rand conversion of export proceeds and advance payments for imports
increases in foreign capital allowances for resident individuals.
2010 Budget framework and revenue outlook
It is projected that as economic growth picks up, revenue will recover – from an estimated R589 billion this year to over R800 billion in 2012/13, from about 24,5% of GDP this year to just over 26%.
Budget deficit and borrowing
- Taken together with the funding requirements of public entities, municipalities, Eskom and other state enterprises, the public-sector borrowing requirement will be R285 billion, which is 11,8% of GDP.
- Debt will increase from 23% of GDP in March 2009 to 41% by March 2013. Interest on state debt will increase from R54 billion last year to just under R100 billion in 2012/13.
- Government will raise some R640 billion in response to the global crisis in debt over four years to sustain investment in the top five priorities.
- The framework proposed for the next three years has a consolidated budget deficit of 6,2% next year, declining to about 4,2% by 2012/13.
- National departments have identified savings of R14,5 billion over the next three years, and an estimated R12,6 billion will be reprioritised from redundant, ineffective or over-priced activities in provincial departments to finance core education, health and infrastructure requirements.
In municipalities and government agencies, spending on unnecessary travel and entertainment, unfocused consultant contracts, procurement supplies at uncompetitive prices and layers of administrative paperwork that interfere with getting the job done, will be cut.
The main Budget makes available an additional R78 billion over the next three years, of which R40 billion will go to provinces, mainly to accommodate higher personnel costs and for spending on education, health and housing, while municipalities will receive over R12 billion over the next three years, for spending on infrastructure and to accommodate the effects of rising electricity and water costs on basic service delivery to poor households.
Funding for government employment programmes will be stepped up in the following areas:
- R2,4 billion has been set aside by the National Skills Fund and the Unemployment Insurance Fund for the training layoff scheme.
- Public Works Programme allocations are included in funding flows to municipalities and various departments, aimed at creating 4,5 million job opportunities over the next five years.
- Funds have been set aside for local community works projects in rural villages.
Education and training
- The allocation for education is expected to increase from over R140 billion this year to R185 billion by 2012/13.
- Building on the recently completed restructuring and recapitalisation of further education colleges, government aims to increase participation to 20% of young people aged 18 – 24 over the next five years.
- A cumulative target of 350 000 industrial and related apprenticeships and scarce skill learnerships has been set.
- A new workbook programme introduced this year will provide supplementary learning material to 5,5 million school learners by 2012 to improve literacy and numeracy in the foundation phase of schooling.
- Funding for the National School Nutrition Programme will increase to reach 8,6 million children in 2012/13.
- The budget framework for next year will provide for the extension of the Child Support Grant to the age of 18, over the next three years.
- Discussions are underway on the wider reform of the social insurance system.
- Public health expenditure is set to rise from R90 billion this year to R115 billion in 2012/13.
- The restructuring of our health system comprises a 10-point plan, which includes an overhaul of management systems, improved human-resource planning, better procurement of medical supplies and investment in health infrastructure.
- Next year, a vaccination campaign will be undertaken to reduce the incidence of measles and extend immunisation coverage.
- Government expenditure on the HIV and Aids Programme will receive an additional R5,4 billion over the next three years.
- R900 million has been allocated to the Department of Health to take account of the increased uptake of the HIV and AIDS treatment programme.
- Improved salaries have been agreed on for medical personnel.
- Public-private partnerships in the health sector will be stepped up, and a new quality assurance system will monitor service-delivery improvement and compliance norms and standards.
- Total spending on rural development at provincial level is projected to increase from about R6 billion at present to about R8 billion in 2012/13.
The built environment
- An additional R1 billion will go to the housing grant programme, and R2,5 billion is proposed for municipal infrastructure grants.
- Expenditure on housing and community amenities will rise from R69 billion this year to over R98 billion in 2012/13.
- Spending on transport will be over R65bn a year over the MTEF period, including completion of the Gautrain Project, major improvements in the Gauteng road network and initiation of public-transport improvement programmes in 12 cities and metropolitan areas.
- Public order and safety accounts for R78 billion this year, growing to over R100 billion in the next three years.
- The Budget will provide for an additional 22 400 police personnel, aimed at strengthening detective services and crime intelligence.
- The fight against crime is also part of the challenge of building social cohesion and creating opportunities for young people. Crime has a major impact on our economy and is undermining the ability of business and institutions to function.