Mini budget

The Minister of Finance briefed Parliament on the 2016 mid-term Budget. The speech focused on decreasing government expenditure, raising tax revenues and preventing a ratings downgrade. He acknowledged that South Africa faces a difficult period ahead as a result of a weak global outlook and domestic challenges such as low growth, high unemployment, weak business confidence, lower revenue, declining investment, structural constrains and extreme inequality. The economy is expected to grow by just 0.5% this year. As a result of the slow growth, resources will be limited and responsible choices will have to be made in allocating them. The mini-budget is a reflection of such choices.

Most of the spending growth will be directed towards core programmes such as social services and infrastructure to boost economic growth. Public works programmes that contribute directly to employment will continue to grow rapidly. A further expansion in the HIV/AIDS programme, which now reaches 3.5 million people, is planned. The conditional grant for the National Health Insurance is increased in order to continue contracting general practitioners and bring professional capacity into the School Health Programme. Social grants play a crucial role in helping alleviate poverty, therefore, the Minister has extended child support grant for orphans. A new conditional grant will expand early childhood development services and the maintenance of related infrastructure will be introduced. Government has now decided to also increase the child support grant by R10 to R360 to offset the effects of high food inflation recorded earlier this year. Funding has also been set aside to provide financial support to about 35 000 prospective teachers through bursaries under Funza Lushaka.

In addition, to the R16 billion added to higher education funding in the February budget, National Treasury proposed a further R9 billion to be added to the National Student Financial Aid Scheme (NSFAS) over a three year period and in the process, raising its funding by over 18% per year. R8 billion will be earmarked to meet the costs of fee increases for students from households with incomes of up to R600 000 per annum.

Meanwhile, the Department of Planning, Monitoring and Evaluation will step up service delivery monitoring over the medium term. This will include 90 unannounced visits to service delivery facilities per year. Over the medium term, sites to be visited include hospitals, clinics, police stations, Home Affairs local offices and magistrate courts. A further proposal was made to reduce national departmental budgets by 1.1%, asking them to use existing resources to optimise delivery.

There is a proposal to raise R43 billion through tax measures over the next two years. The taxman will do so through various measures - VAT, sugar taxes, personal taxes or company tax. Either way, it will trickle down to households. According to the mini budget, growth in household income after inflation slowed to below 1% a year, which means incomes are not rising much above the official inflation figure – even though bills are. The reality for most South African households is that tough times lie ahead and citizens need to start budgeting and spending wisely.