ATC201110: Report of the Select Committee on Finance on the 2020 Revised and Proposed Fiscal Framework, Dated 10 November 2020

NCOP Finance



Having considered the 2020 Medium Term Budget Policy Statement of the Minister of Finance on the 2020 revised fiscal framework and 2021/22-2023/24 proposed fiscal framework, the Select Committee on Finance reports as follows:


    1. The Minister of Finance (Minister), Mr Tito Mboweni, tabled the 2020 revised fiscal framework and the proposed 2021 medium-term framework in line with the relevant provisions of the Money Bills Amendment Procedure and Related Matters Act, Act No. 9 of 2009 (Money Bills Act), on 28 October 2020.
    2. The Minister further virtually briefed the committees of finance and appropriation of both Houses on 29 October, accompanied by the Deputy Minister of Finance, Dr David Masondo, and the National Treasury team.
    3. The Committee received an analysis and submissions on the revised and proposed frameworks from the statutory bodies, the Parliamentary Budget Office (PBO) and the Financial and Fiscal Commission (FFC), on 03 November.  
    4. The Committee invited public comments on the MTBPS and received written and oral submissions (on 04 November) from the Congress of South African Trade Unions (COSATU), the South African Institute of Chartered Accountants (SAICA), the Organisation Undoing Tax Abuse (OUTA), the Fiscal Cliff Study Group (FCSG), the Healthy Living Alliance (HAELA), Mr Peter Meakin. Written submissions were received from the Budget Justice Coalition (BJC), the Pay the Grant Campaign, the Katsia Capital Partners, the Dear South Africa Campaign, Old Mutual Investment and the Amandla.Mobi.  


    1. The Minister stated that the South African economy was now in a danger zone as any fiscal slippage could lead to debt reaching 100% of the GDP or greater. He said that the ‘active scenario’ model painted in the July Special Supplementary Budget, which was promulgated as a result of COVID-19 pandemic, aimed to stabilise South Africa’s debt in three years. The MTBPS had now this debt stabilisation trajectory to five years. The Minister emphasised that the rising debt service costs needed to be carefully managed.
    2. The Minister told the committee members that the funding of the South African Airways business rescue plan required moving funds around from the budget votes of departments. This resulted in the R10.5 billion rand being allocated to SAA, he said. He said the greater casualties of the cuts were the education and police votes.
    3. The Minister stated that the fiscal deficit in 2020 was expected to deteriorate to 15.7% of GDP in 2020 as the economy was expected to contract by 7.85%. Tax revenue was expected to decline by R322 billion, while debt was expected to rise to 95% of GDP over the medium term.
    4. The Minister requested to be given an opportunity to brief the Committee on the water boards challenges that are presented by municipalities.


    1. Mr Dondo Mogajane, the Director-General of National Treasury, stated that the MTBPS was concerned with 3 main issues which are: the saving of lives through providing massive health responses and providing relief to households and businesses in response to the COVIC-19 pandemic; crystallising the economic recovery planand; bringing about stability to public finances over the medium-term.
    2. The National Treasury team highlighted that South Africa was engulfed by the COVID-19 pandemic amidst already weakening economic conditions. It said that the COVID-19 pandemic had caused economic contraction globally and locally, although the economy was expected to recover next year. The economic outlook pointed to faster growth from developing countries led by emerging economies such as India and China, NT said. Sub-Saharan Africa was projected to grow by 3% in 2021/22
    3. The South African economy was expected to grow by an average 2.1% over the medium-term with output returning to pre-pandemic levels in 2024.
    4. In respect of the economic recovery plan, NT said that the implementation of structural reforms are a key part to addressing low growth challenges and low long-run economic output. It said that in the short-term, NT will focus on building infrastructure, expanding electricity generation, allocating the digital spectrum and supporting rapid industrialisation and employment.  The longer term structural reforms include the modernising of network industries, reducing barriers to entry, and increasing regional integration and trade. NT said that these structural reforms could raise growth over 3% over the next ten years, creating more that 1 million jobs.
    5. NT said that the extraordinary shocks to the economy this year would translate into large revenue shortfalls that would persist over the medium term. It said that while the country’s primary balance of the last ten years was favourably comparable to other developing countries, the projected increase in South Africa’s debt-to-GDP over the medium-term was among the worst, requiring stern measures to arrest the unsustainable debt situation, the resultant debt service costs and the deteriorating government balance sheet.
    6. NT said that its proposals in the MTBPS was to reduce the fiscal deficit and stabilise the debt ratio over a five-year period. This would entail reductions on non-interest spending and achieving a primary budget surplus in 2025/26, NT said. NT said that it was proposing to improve the composition of spending from consumption towards investment.
    7. NT was further proposing reductions to the government wage bill which will result in growth of only 1.8% of the wage bill in 2020 and an average annual growth of only 0.8% over the 2021 medium-term expenditure framework.
    8. The major risks to the outlook were: a second wave of the COVID-19 pandemic, uncertainty around the speed of economic recovery and the additional spending pressures from SOEs.


    1. The South African economic outlook has deteriorated further since the tabling of the special adjustment budget in July 2020. Real GDP is now expected to contract by 7.8 per cent in 2020 compared to 7.2 per cent projected in the July 2020 budget (a downward revision of 0.6 percentage points). According to the National Treasury, the sharp downturn in the domestic economy follows a decade of economic stagnation while COVID-19 and measures taken to protect public health resulted in steep declines in consumption, investment andexports.
    2. The economy is expected to recover to a real GDP growth rate of 3.3 per cent in 2021, with growth averaging 2.1 per cent over the medium-term. National Treasury emphasised that based on this projection, the economy will only recover to 2019 levels in 2024. Rapid and effective implementation of the economic recovery plan is expected to drive economic growth over the medium-term. This plan was agreed on by the social partners and it targets short and long-term structural reforms to boost growth and remove constraints to investment and employment (2020 MTBPS).
    3. Table 1 below shows the revised GDP growth estimates and the National Treasury’s forecasts over the medium term.  

Table 1: Macroeconomic projections







Calendar year






Percentage change






Household consumption






Gross fixed-capital formation






Real GDP growth






GDP at current prices (R billion)

              5 078   

      4 885   

    5 240   

      5 553   

           5 877   

CPI inflation






Current account balance (% of GDP)






Source: National Treasury, Reserve Bank and Statistics SA

  1. Inflation expectations appear to be well anchored in 2020 and over the medium-term, remaining within the set target range of 3-6 per cent. Statistics South Africa’s second quarter Labour Force Survey depicts a bleak picture of the labour market. The number of employed persons decreased in all industries between the first and second quarters of 2020, with the largest declines recorded in the community and social services (515 000), trade (373 000) and private households (311 000). In comparison with the same period last year, the economy shed about 2.2 million jobs on a net basis. The number of employed persons also decreased in all provinces between the first and the second quarter of 2020, with the largest employment decreases recorded in Gauteng (661 000), KwaZulu-Natal (375 000) and the Western Cape (321 000).
  2. Key risks to the economic outlook identified by the National Treasury include weaker-than-expected growth, continued deterioration in public finances and, a failure to implement structural reforms. In additional to that, a second wave of COVID-19 infections, accompanied by new restrictions on economic activity, would negatively impact the outlook.
  3. Table 2 below shows that the consolidated revenue is expected to decline from R1 398.0 trillion projected in the 2020 Budget in February to R1 276.7 trillion in the MTPBS (October 2020), a decline of R121.0 billion. According to the National Treasury, this decline is aligned with the revised economic growth projections and the expected performance of the major tax categories. National Treasury expects gross tax revenue to be 17.9 per cent lower than collections in 2019/20, or R312.8 billion below the 2020 Budget forecast. Over the medium-term, revenue is expected to reach R1457.6 trillion in 2021/22 and R1595.8 in 2020/23. National Treasury emphasised that it will take several years for implementation of the government’s economic reforms to yield results, meaning that revenue collection will remain weak over the medium term.
  4. Consolidated expenditure as a percentage of GDP is projected to increase from 35.9 per cent or R1.85 trillion in 2019/20 to 41.9 per cent or R2 trillion in 2020/21. National Treasury is concerned that current expenditure is increasingly funded by debt and now it plans to shift thecomposition of expenditure away from consumption towards capital investment.

Table 2: Revised 2020 fiscal framework and active scenario medium term estimates


Source: National Treasury

  1. In 2020/21, the consolidated budget deficit has been revised from 6.8 per cent of GDP projected in the 2020 Budget to 15.7 per cent of GDP. The consolidated budget deficit will narrow from 15.7 per cent of GDP in 2020/21 to 10.1 per cent in 2021/22 and 7.3 per cent in the last year of the Medium Term Expenditure Framework (MTEF) period. National Treasury acknowledged that the options to stabilise the fiscus are becoming increasingly limited. 
  2. Consolidated gross national debt is projected to reach 81.8 per cent of GDP in the 2020/21 up from 65.6 per cent projected in February 2020. Gross national debt is now expected to reach almost 93 per of GDP or R5.54 trillion in 2023/24. The key drivers of this increase, according to the National Treasury remain the budget balance and it cautioned that the probability of a debt trap has increased.
  3. Key risks to the fiscal outlook identified by the National Treasury include the speed at which the economy recover, the outcome of the legal process associated with public-service compensation and the forthcoming wage negotiations and additional fiscal pressures from the state-owned companies, social security funds and municipalities.


      1. The FFC (Commission) noted that the MTBPS was tabled shortly after government was forced to adopt a special adjustment budget due to the COVID-19 pandemic. It noted further that the pandemic had exacerbated structural and fiscal fragilities, amplifying the existing socio-economic inequalities and pushing many people into poverty and unemployment. 
      2. The FFC said that the economic and fiscal outlook was uncertain and was likely to undermine the credibility of the overall fiscal framework given the outstanding wage bargaining agreement and the deteriorating fiscal position of state-owned enterprises. It submitted that core spending functions were facing stagnant and declining budgets that were likely to affect service delivery and the overall development targets. It submitted that government needed to plan to increasingly reprioritise its expenditure in a growth friend consolidation manner over the MTEF period.
      3. The FFC said that the economic uncertainty called for a much broader relief or stimulus package and clear commitment to quality execution and reforms.
      4. The FFC noted that although, according to Statistic South Africa’s latest figures, the unemployment rate had dropped from 29.0 per cent to 23.3 per cent, currently there were more people of working age (16-64 years of age) who were currently economically inactive (5.2 million) than the labour force and this worsened inequality and poverty.
      5. The Commission submitted that NT’s macro-economic forecasts were generally over-optimistic. It said that this has had significant consequences for the credibility of the MTEF estimates and fiscal levers for informing and achieving fiscal sustainability. The FFC further submitted that real economic recovery can be achieved through the actual implementation of reform plans as opposed to subjective sentiments of optimism/pessimism. It said that instead of taking an overly ambitious fiscal policy position such as zero-based budgeting, a more practical approach to public finance management is the costing and pricing of functions to align public finance and outputs to outcomes.
      6. Assessing allocations between special adjustment budget (SAB) relative to MTBPS, the FFC noted that the MTBPS revenue projections for 2021/22 were lower by R4.6 billion. It also noted the slight easing of the consolidation path set out in the SAB in July, with the addition R37 billion in 2021/22 and R66 billion in 2022/23 to the main budget expenditure. While most of this additional expenditure went to non-interest expenditure (R29 billion in 20221/22 and R49 billion in 2022/23), debt services costs were also higher, continuing to crowd out other forms of spending especially in provinces and municipalities.


    1. The PBO provided an update on the global Covid-19 pandemic, showing that many countries were experiencing a second wave of infections leading them to lockdown their economies. It said that these developments posed further uncertainties and risks to recovery. In this regard, the PBO further noted a global consensus that public sector action in the form of fiscal and monetary stimulus remains vital to avert further economic collapse.
    2. The PBO submitted that the MTBPS fiscal policy stance was too focused on rapid debt reduction and disregarded the role of the state in adequately responding to an ongoing pandemic and the possibility of a deepening economic crisis. It said that it was concerned that spending cuts in critical development areas could reverse the country’s socio-economic gains of the post-apartheid era.
    3. The PBO expressed further concerns that government intends to support the economic recovery by leveraging private sector infrastructure investment and implementing structural reforms. It said that pinning hopes of recovery on the private sector investment during times of crises was too risky as they tend to keep their assets liquid. The PBO added that reliance on private investments and household consumption may be misplaced during the MTEF.
    4. The PBO submitted that over the 2013 to 2019 fiscal consolidation period, low government expenditure into the economy, accompanied by declining public corporation investment, had a negative impact on aggregate demand and private sector investment levels. It said that during this period aggregate demand by households (60% of GDP) was low before the pandemic and collapsed during the pandemic. It submitted that it was therefore too risky to expect a quick recovery in household consumption without added government support to households.
    5. The PBO said that the high and increasing levels of public debt during the pandemic was a global phenomenon, as many governments hadresorted to quantitative easing (QE) where central banks purchased government bonds to try and stabilize their financial markets and reduce risk and debt costs. It said that the South African Reserve Bank haddone too little in this regard to reduce risks and debt costs.
    6. The PBO submitted that the MTBPS’ fiscal stance was less focussed on strategic priorities as set-out in the MTSF and Economic Reconstruction and Recovery Plan adopted by government in October 2020. It further submitted that public spending levels were not matched by the high levels of quality or efficiency in service delivery.
    7. The PBO submitted that the 2020 MTBPS presented a further deterioration in the outlook for the fiscal framework compared to the 2020 Budgetin February and the special adjustment budget of July. It said that the large and unprecedented downward-revision to the growth outlook arising from the Covid-19 pandemic, combined with the large reductions in revenue projections arising from a lower growth outlook, have contributed to a worsening main budget deficit over the medium term.
    8. The PBO questioned the credibility of government’s stated medium-term fiscal objectives of stabilising debt over the medium term, warning that the projections/ forecasts were somewhat too optimistic given the experience of the last 10 years. It said that fiscal slippage had primarily been due to growth outcomesthat were lowerthanforecast, shortfalls in revenue collectedcompared to projections, and occasional breaches to expenditure-ceiling due to fiscal support for SOEs.
    9. The PBO noted the additional tax measures amounting to R40 billion over the medium-term and said that some policy proposals in the MTBPS may worsen tax revenue collection if implemented. On the latter, it cited as an example the planned reduction in the public sector wage bill and the impact that this would likely have on personal income tax (PIT) and VAT.
    10. Lastly, the PBO said that some of the justifications for proposed large reductions in the public sector wage bill were unfounded as the public sector wage bill, according to PBO’s analysis, had declined from 38% in 2000/01 to 33.9% in 2019/20. It raised concerns that more than 80% of the targeted wage reductions were in labour-intensive areas of learning and culture, health and peace and security, arguing that this would strongly impact service delivery. It submitted that broad sweeping cuts to the public sector wage bill may lead to clashes with public sector unions, affecting the current wage agreement and upcoming wage talks.


      1. COSATU said that the economy was facing its worst crisis in hundred years; a deep economic recession having lost 2.2 million jobs and the unemployment rate having jumped up from 40% to 52%. COSATU said that it agrees with government that the debt trajectory cannot be allowed to continue as it posed a threat to our national sovereignty and if we enter a debt trap and go to the IMF, it will be workers who will pay the price through retrenchments, lost wages, the collapse of public services and privatisation.
      2. COSATU said it was however opposed to the route that the MTBPS proposes. It noted that the MTBPS’ major thrust was public debt and that the fiscal pressures should be addressed by imposing a 4-year wage freeze on public servants, among others. It submitted that denying stimulus to an economy on its knees was akin to denying medication to a patient in the ICU. It said that thiswill suffocate the economy when it needs liquidity the most. COSATU submitted that government’s approach threatened to send the economy intoa depression.
      3. COSATU said that it agreed with the Presidential Economic Advisory Council and the Finance and Fiscal Commission who urged the National Treasury and government to take a balanced approach that focusses first on saving companies and jobs and injecting the necessary stimuli into the economy. It said that saving the jobs and companies will enable them to continue to pay taxes and contribute to rebuilding the economy and not be a burden on the state.COSATU stressed that there can be no economic recovery with unemployed workers and closed businesses.
      4. COSATU submitted that the public service wage bill was not the source of the fiscal crisis. It said that targeting the wage bill was a cheap and lazy scapegoat by government, noting that the wage bill has been stable at 35% of the budget since 2009 and the 2020 wage agreement the lowest in a decade. COSATU strongly condemned the comparison of salaries of skilled public servants such as nurses, teachers and doctors with the entire private sector jobs profile which it said was notorious for paying slave wages to the under skilled. COSATU urged government to engage with unions at the PSCBC on how to stabilise the fiscus and reduce the“fat on top for overpaid politicians and managers and protect lower and middle income public servants from inflation”.  It further urged government to stop undermining legislated collective bargaining and to honour the 2020 wage agreement and fast track the next 3-year agreement. It submitted that a four-year wage freeze will impoverish lowly paid public servants, spur a brain drain of skilled workers and undermine quality public services.
      5. COSATU argued that the MTBPS fails to address the fundamental causes of the fiscal crisis which are the; 10% of the budget that is lost to corruption and wasteful expenditure annually, the billions lost in tax and customs duties evasion, the massive bail outs to the SOEs and, a stagnant economy. It said that despite having tabled bold anti-corruption proposals, there are none in the MTBPS.  Neither does the MTBPS include measures to further capacitate SARS nor does it provide clear road maps to rebuild the distressed SOEs, COSATU submitted. It said that it took COSATU to intervene to draft an Eskom Social Compact. 
      6. Further critiquing the MTBPS, COSATU said it was thin on measures to revive the economy. Whileit welcomed the allocations for infrastructure for healthcare, housing and ports, COSATU had hoped to see more for energy, rail, roads and water. It submitted that the Minister needs to move with speed now to amend Regulation 28 to allow for investments in infrastructure.  COSATU further submitted that the President now needs to intervene in ensuring that other regulatory delays,such as the releasing of digital spectrum, are fast-tracked. It further stated that It was worrying that government is not moving with speed to overhaul the public procurement system or fast-track the Public Procurement Bill.
      7. COSATU said it had hoped that to see more practical commitments with regards to the targets of the Economic Reconstruction and Recovery Plan.  It also expressed concerns that government was seemingly walking away from the R200 billion Loan Guarantee Scheme which, seven months later, had only met a paltry 8% target. It added that it was unconscionable that the NCCC unilaterally stopped the UIF’s TERS last week as this was one of the few sources of stimuli and economic relief in the economy, urging that it must be restored.
      8. Lastly, COSATU welcomedNT’s agreement to introduce legislation by the beginning of 2021 to allow workers in distress to access a portion of their pension funds as cash or loans. It said that this will provide some badly needed relief and help to avoid workers cashing out their entire pension funds.  It submitted that this legislation be fast-tracked and enacted by1 October 2021.


    1. SAICA said that the imminent risks to the country’s finances were: a low and dwindling growth rate; excessive public sector compensation with too many people with inappropriate skills for the jobs they are in and too few people with the appropriate skills, too many SOE’s and government agencies that serve no valid strategic purpose and too many unsustainable SOE’s, resulting in contingent liabilities; municipalities’ failing ability to provide real services, being fiscally unsustainable and destroying the environment through sewage and other pollution and scarce potable water wastage and; high debt levels at all levels of government and also within society with no credible plan ofsettling this debt in a responsible manner.
    2. SAICA added that over the last decade growth has averaged less than 2% annually and a slight improvementis envisaged in the short term. It said that should these rates not be achieved; this would once again leadto overspending by Government. It questioned if the projected growth numbers were realistic or not.
    3. SAICA said that public sector compensation was now above 40% if taken as a percentage of total revenue (and would reach 50.1% in 2020/21). It noted that government has committed to reduce the wage bill over the medium-term. It however questioned the rationale behind reducing more than 80% of the total compensation at the critical functions of learning and culture,health and, peace and security functions. It noted further that despite the overall planned reduction in compensation, growth in the wage bill of 1.8% in thecurrent year and an average annual growth of 0.8% was proposed over the medium-term. SASICA submitted that actual expenditure should be cut in order to realise any tangible reductions in the budget deficit. SAICA further recommended that the cuts for compensation and benefits, starting at the top, were necessary. It emphasiseda need for government to collaborate with unions to implement an effective and transparent productivity enhancement plan that will ensure accountability at all levels.
    4. SAICA stated that several state-owned entities were insolvent and have insufficient funds to cover their operational expenses, leading them to turn to the fiscus for support. It said that this would result in contingent liabilities of R1 trillion by 2022/23 and represent material risks to government with high prospects of realising. It said that government needs to develop and implement a credible plan on how it would address these contingent liabilities of institutions such as the Road Accident Fund. It also recommended that investigations into corruption at all affected entities be expedited and be accompanied by prosecution and asset recovery.
    5. SAICA recommended that all non-performing SOEs be liquidated, adding that spending money on them with no foreseeable financial or strategic returns should cease and that money be redirected to projects with realisable returns. SAICA also recommended that challenges in municipalities be fixed to prevent unrests linked to service delivery failures. In line with this it recommended that future budget allocations to each municipality be based on past performance and audit outcomes. SAICA recommended that COGTA assists ESKOM and Water Boards to enforce payments of water and electricity by municipalities.  
    6. SAICA noted that South Africa has the highest projected increase in debt over the next three years comparedto any of its peers. It noted that interest on this debt is crowding out other public service spend and toreduce it, in the main, government employee compensation will be reduced. SAICA cautioned that government needs to have a “plan-B” in case the negotiations on these wage reductions fail. It further recommended that government should implement the zero-based budgeting process immediately as this would help identify additional areas where expenditure can be cut.


    1. OUTA said that the 2020 MTBPS was the most important moment in South Africa’s fiscal history, because of the effects of the Covid-19 pandemic and the failure to curtail systematic looting of public resources over the past decade. It said that the current situation demands a robust fiscal policy that will eliminate any and all expenditure items that have not had a measurable and satisfactory impact on the lives of ordinary South Africans.
    2. OUTA recommended the establishment of a committee which focuses on inclusive fiscal policy. It said that the proposed committee would be of a similar nature to the Davis Tax Committee, but given that there is a fiscal crisis, instead of being focused on tax policy, this committee could have a Terms of Reference to provide technical and research capacity on fiscal policy to National Treasury. It explained further that that committee can be tasked to develop a fiscal policy paper promoting private sector growth and focusing on more productive categories of spending. The committee can also be tasked to advise on approaches to address key fiscal risks such as those arising from contingent liabilities, with structured public inclusion of civil society leaders, OUTA explained.
    3. On revenue, OUTA questioned whether the current tax regime promotes growth, as there were gradual increases in the rates of taxation on consumption and income counterbalanced by the steady decline of productivity and ongoing non-compliance with public finance management legislation. It said that this exacerbates the negative trend of productive economic activity. Overall, OUTA recommended an investment in the institutional capacity of SARS and the NPA to eliminate base erosion.
    4. OUTA said that South Africa spends significant amounts on the public service but instead of improved productivity, there was an increased entrenchment of corruption and maladministration, knee-jerk solutions for failing state-owned entities, economic recovery plans which are not properly implemented, and ever-increasing debt.It submitted that greater transparency on spending at all levels was a crucial weapon against corruption. The Public Procurement Bill must provide for access to information, it said.
    5. It said that spending was dominated by the wage bill, which is about 36% of spending, but productivity remains low. OUTA said that it was necessary to reduce remuneration in the public service to what can be justified in terms of labour productivity and performance outcomes. It urged that dubious appointments which aided state capture must be investigated and remedied. OUTA further recommend that service delivery outcomes and performance be used as indicators of where deeper cuts should be made to the wage bill.
    6. OUTA said that state-owned enterprises continue to be a drain on the fiscus. It said there is no clear policy on failing SOEs: instead, government provides ad hoc bailouts, although these are insufficient to keep them running. It submitted that it was time to let go of failed entities like SAA and Denel, and for the state to become the enabler of competitive industries. It submitted that the R10.5bn bailout for SAA is unjustifiable and was saddened that this involved raiding 41 budget votes.
    7.  OUTA said that it supports the zero-based budgeting approach, with the promise of looking at each programme to assess its benefit. It however said that this was not a panacea for curing management ills, but it is a useful tool to increase the efficacy of the budgeting processes. It said it would like to see zero-based budgeting implemented at all levels of government and hopedthat it will enforce efficient allocation of resources and detect inflated budgets. It also recommended that National Treasury should lead expenditure reviews. OUTA made further comments on the strengthening of finances at provincial and local government levels.


    1. The Fiscal Cliff Study Group (FCSG) stated that its research focuses on the point where social assistancepayments, civil service remuneration and debt-service costs absorb all government revenue. It said that, according to the 2020 MTBPS, South Africa has now reached the cliff as the sum of the threeexpenditure items will amount to more than 100,0% of tax revenue. It said that this was a drastic deteriorationfrom the February 2020 budget, when this ratio was 75,5% of tax revenue and 2007/08, when thisratio was 55,0%. It said that although some recovery could follow after the 2020/21 expenditure spike; it has seen a structural shift closer to the cliff face.
    2. The FCSG said that it took cognisance of the impact of the Covid-19 pandemic and the concomitant drop ineconomic activity. It said that this had a major impact on revenue collection which will be reduced by someR312.8 billion, the main reason for the sudden deterioration in the fiscal cliff barometer.
    3. The FCSG said that the civil service remuneration was a significant driver of the fiscal cliff. It said that budgeted remuneration is expected to be reduced by R226.4 billion over the medium term. It noted that although significant, this is not a reduction inremuneration but merely a smaller provision for future increases as the wage bill will still rise at around0,8 percent per annum over the medium term. It recommended that this growthrestraint should be applied in practice; i.e., civil service remuneration growth should not exceed thebudget limit.
    4. The FCSG noted that a once-off social grant payment increase of R41 billion was introduced. It said that although necessary, thesemeasures are not sustainable over the long term and recommended these once-offincreases should be phased out.
    5. The FCSG noted that the same large expenditure items (e.g. civil service remuneration expenditure) which wereallowed to rise unsustainably during the last decade, are now being crowded out by increases indebt service costs and attempts to stabilize the debt levels. It said that the National Treasury was already finding it harder to acquire sufficient liquidity in local financial markets, thusbeing forced to increasingly utilise short term domestic loans as well as foreign loans – both of whichcreates additional funding risks to the country.
    6.  The FCSG said that austerity budgets are inevitable, as South Africa did not have austerity budgets (an austeritybudget is, at the least, a balanced budget) for the past decade. It said that some form of austerity shouldtherefore be implemented in future budgets to avert a permanent fiscal cliff.
    7. The FCSG further submitted that government should refrain from helping non-essential failed state-owned enterprises such Alexkor, Denel,SA Express and Airways. To put it into perspective, the FCSG said that the R10,5 billion awarded to SAA was equal to almost half of some R22,0 billion of personal income tax that is paid by the roughly 2 million individuals in the lowesttaxable income bracket. The FCSG added that there must be a restraint on the remuneration and bonuses of executives at SOEs.
    8. The FCSG said that government should take note of the Minister of Finance’s warning of a looming “sovereign debt crisis”. It said that global lenders’willingness to provide funds should not be confused with South Africa’s ability to repay thesefunds. Lastly the FCSG called for the publication, for public scrutiny,of all contracts of national and provincial governmentdepartments and municipalities.


    1. HEALA told the Committee that South Africa has a non-communicable disease crisis fuelled by an obesity epidemic. Sugary drinks are a major cause of obesity, diabetes and other related diseases, it said. It explained that obesity rates are growing rapidly among children: 13% of children under the age of 5 years are considered overweight. It said that according to the 2016 Demographic and Health Survey, 13% of women and 8% of men ages 15+ have diabetes; high rates of women and men are pre-diabetic. It noted that obesity-related diseases (e.g. heart disease, diabetes, stroke and some cancers) are among the top 10 causes of death (3), accounting for 43% of deaths in the country. Drinking sugary drinks, regardless of other behaviours, can lead to weight gain, overweight and obesity, it added. It said that sugars in drinks alter the body’s metabolism, affecting insulin, cholesterol, and metabolites that cause high blood pressure and inflammation. These changes to the body increase the risk of diabetes, cardiovascular disease, tooth decay, and liver disease, it said.
    2. HEALA submitted that juices in South Africa are increasingly popular, and contain high amounts of sugar, equivalent tomany beverages already taxed under the Health Promotion Levy (HPL).It said that juices were becoming increasingly popular, with a 15% increase in volume-basedgrowth in the sector, as consumers believe that juices are a healthier alternative to softdrinks.However, HEALA said, fruit juices such as Clover Krush 100% juice has 27 grams of sugar per 250 mL serving & Rhodes Quality 100% juicehas 25g sugar per 250 mL serving. Coca-Cola has 26.5 grams of sugar per 250 mL serving. Havingone glass of juice or soda per day has the same amount of sugar and would be nearly half of theWorld Health Organization’s recommended total maximum sugar intake for one day, HEALA explained.
    3. HEALA said that diabetes and other associated diseases are very costly to treat.It said that would cost R21.8 billion to treat all of the people in South Africa who are estimated to have type2 diabetes. This is equivalent to 12% of the national health budget.HEALA said that it campaigns and advocates for policies and regulations that empowerSouth Africans to make healthier food and lifestyle choices.It submitted that sugary drink taxes are an effective way to reduce the consumption of harmful sugary drinks,including soft drinks and juices.It said that numerous studies from the United States and Mexico have shown that sugary drink taxesreduce purchasing and consumption of sugary drinks. HEALA said that it expects that the HPL has alsoreduced purchasing and consumption of sugary drinks, as shown in the evidence, but the effectwould be stronger if HPL were increased to 20%.It said that Mexico’s sugary drink tax (of about 10%, similar to SA’s HPL) reduced purchases by 6% in thefirst year of the tax. It added that a study conducted 2 years after the tax’s implementation found that thereduction in sugary drink purchases was sustained and resulted in a 10% decline in purchases.Three years following the tax’s implementation, consumption declined particularly amongmoderate (1 serving/week) and high consumers (one serving/day) of SSBs.
    4. It noted that almost one year after Philadelphia’s implementation of a 1.5 cents per ounce beverage tax, dailyconsumption of added sugar decreased 22% (15 grams) for children who had consumed about 1regular soda daily prior to the tax. Adult consumption of regular soda reduced by approximately6 grams per day.HEALA said that a few months following the implementation of Berkeley’s (California, US) 1 cent per ounce SSB tax,low-income adults reported a 21% decline in their consumption of SSBs, and an increase in waterconsumption. One year following the tax’s implementation, the volume of sugary drinks solddecreased by 10%. Three years after the tax was implemented, consumption was reducedby about a half-drink per day, while water consumption increased by a full drink per day.
    5. HPL is a win-win-win solution for the South African government:
      1. Taxes on sugary drinks are a public health win that reduces the consumption of sugary drinks.
      2. Sugary drink taxes also raise much-needed revenue that can be used to further improve thehealth and well-being of South Africans.
      3. A majority of South Africans support sugary drink taxes and the support is even stronger (70%)if some of the revenue from the tax is spent on public programs.
    6. Recommendations:
      1. Increase the HPL from 11% to 20%, in line with the recommendation from the World HealthOrganization.
      2. Include fruit juices in the HPL.
      3. Pressure NEDLAC to complete and release the study on the impact of HPL thus far.


    1. Mr Meakin claimed that in his 2018 MTBPS, the Minister of Finance endorsed the adoption of land taxes in place of income taxes.  He claimed that the Minister cited the inefficiency of income taxes (and vat), which increase the costs of goods and services by ±28% (15% in vat). Mr Meakin argued that income taxes and vat increases the cost of living of 17m households by an average R70Kpa.
    2. He also argued that land taxes lower the cost of land as section 25.5 of the Constitution, allegedly, demands. He said that compensation for declines in land prices lie in making other assets tax-free. He explained that these include houses, plant, machinery interest, profits, dividends, capital gains, consumption and pensions.  He further argued that wages and salaries also increase when payroll taxes are discarded. South Africa then becomes tax-haven like Hong Kong.
    3. Mr Meakin said that, in 2019 and 2020, the Minister seems to have abandoned the plan to substitute land taxes for income taxes and vat. He argues that this would have saved a further R667bn in 2020, including departmental savings of R451bn, new land revenue sources of R120bn and R106bn savings in not having to comply with SARS regulations. Mr Meakin further added that the R667bn could repay all of Eskom and Sanral debts in three years.
    4. Mr Meakin said that other advantages of a single land tax are that:
      1. As land becomes affordable new types of villages will spring up. These are like retirement villages but with horticulturists not carers. This could provide jobs to nine million unemployed people who can learn how to become independent market gardeners earning ±R12.5Kpm. 
      2. With land taxes it will be unnecessary to fund infrastructure as a budget item.  For these works can be paid out of the increase in property values which the infrastructure prompts.  In this way SANRAL’s and ESKOM’s debt can be redeemed in three years.
      3. Another reason why the state should tax land not work and man-made wealth is that the cost of hiring and capital becomes lower. Mr Meakin said that this will transform the South African economy into a tax-haven like Hong Kong and Singapore. He clarified that these countries are not tax havens and the state own all the land in Hong Kong, which is then leased out for periods of up to ninety-nine years.


    1. BJC expressed its great concern about the direction that the 2020 MTBPS seeks to take SA. It said that years of budget cuts to basic services detailed in previous BJC submissions - coupled with widespread corruption throughout government and the state owned companies, has already eroded the quality of public goods available to the majority of people. 
    2. It said that its analysis was that the MTBPS proposals will delay the economic recovery from COVID-19, cause further job losses in the private sector (due to reduced demand) and the public sector (due to the obsession with cutting the wage bill), push more people into poverty (by removing the child support grant caregiver top up), and widen the gulf of inequality between the haves and have nots in our country even wider (by eroding public services which the poor rely on while not asking the rich to pay their fair share in taxes on wealth and high incomes). 
    3. The BJC said that it understood the need for long-term debt sustainability, but rejected austerity premised mainly on spending cuts as an efficient or fair way to achieve this.  It called for:
      1. Government to prioritise fulfilment of human rights in the budget. This means guaranteeing that people’s hard won rights of access to education, health care services, housing, social security, safety, water, sanitation and a healthy environment will not be sacrificed to an unnecessary austerity programme.
      2. The incorporation of human rights based budgeting principles - outlined in Imali Yesizwe, our alternative budget based on human rights.
      3. Focus on improving the efficiency and effectiveness of government expenditure rather than making cuts. Reductions to the public sector wage bill along with declining spending on school infrastructure, police and health services (among others) will negatively impact on the state’s ability to drive economic recovery and protect human rights. 
    4. The BJC submitted that a strategy is needed to raise more revenue and to address debt in a sustainable way, which must include: 
      1. A fiscal stimulus that directs resources for basic services to the majority of South Africans (including the expansion of cash transfers) and investment towards enhancing productive capacity.
      2. Extension of R500 Caregiver Social Relief of Distress Grant (SRD) and the R350 Unemployment SRD until the implementation of a Universal Basic Income Grant and increase these along with R450 Child Support Grant to the level of the food poverty line (R585).
      3. Increased progressive taxation: Raising more resources from wealthy and high income individuals and large profitable companies, which is also essential to reduce inequality. Consider a sugar tax to fund diabetes treatment programmes and the COVID-19 health response.
      4. The public disclosure of loan agreements, the terms of the agreements and the conditionalities attached to them should be mandatory. 
      5. Implementation of stricter capital control measures to slow down the level of capital outflows from the South African economy, in order to mitigate against the volatility of the market and finance capital. 
      6. Revising the municipal revenue model: An operating model that will deliver subsidized and affordable services to households and ensure that key budget items such as infrastructure are fully funded. 
      7. The maximisation of domestic resources by considering other sources of revenue such as the Public Investment Corporation (PIC) R2-trillion and the Government Employees’ Pension Fund (GEPF).
      8. Deal with corruption: Critical entities such as SARS and the NPA must be adequately resourced to plug revenue shortfalls and prosecute those guilty of state capture, corruption and tax evasion
      9. Investment in the care economy (for example, early childhood development practitioners) 
    5. It further submitted that South Africa must resource environmental protection and invest in a just, clean energy transition. Lastly, it submitted that government must introduce public budgeting processes that are not only transparent but genuinely democratic, participatory and open.


    1. stated that it represented of 500 000 members who were primarily low-income black women who had signed its campaign demanding that government increases the Child Support Grant and pensioners’ grant.
    2. expressed its disappointment that all top-up grants have come to an end. It stated that its members had sent out messages to representatives in the office of the President Cyril Ramaphosa and the Finance Minister asking that the grant top-ups be made permanent. It said that upon the announcement that the top-ups were ending, many of its members told that they do not know how they will make ends meet.
    3. submitted that the lockdown, in response to the COVID-19 pandemic, resulted in job losses and put many families on the brink of hunger. It said that analysis of the NIDS-CRAM data showed that the top-ups and the newly introduced grants were pro-poor and curbed hunger. It added that over 30 million people living in households primarily led by women will be adversely impacted.
    4. said that the top-ups have made a huge difference in helping support many families, including women and children in Mzansi to get through the pandemic. It said that the grant amounts were always too low and now taking the top-ups away while the pandemic is ongoing just makes it even more difficult than before to lead a healthy life. said that it would like to be involved in all communications and discussions that are to take place regarding this said that it will keep pushing for grant increases.


    1. The Committee Secretaries received 197 emails from the Dear South Africa Campaign members. All these emails stated that they did not support the 2020 MTBPS, mostly citing issues of corruption within government, the government wage bill and the “SAA bailout”. Some called for the cutting of wages, critiquing government plans and calling for the country to stop importing from China.


    1. Old Mutual Investment said that while it commended the Minister of Finance for the continued attention on fiscal consolidation, it was as a great pity that the June Supplementary Budget’s Active Scenario to stabilize the debt ratio at 87.4% by 2023/24 was abandoned within 4 months. It said that back in June, it viewed the commitment to the Active Scenario as very positive in reducing the risk of a so-called “fiscal cliff” or a sovereign debt default.
    2. Old Mutual Investment stated that the new stabilization target for the debt-to-GDP ratio of 95.3% two years later is simply not good enough given the inherent risks at achieving the proposed wage bill savings that make up the bulk of the envisaged improvement in the budget deficit. It said that the continued risks around the growth profile adds to this risk in not achieving the even later debt stabilization.
    3. It expressed relief to see the continued focus on expenditure cuts rather than significant tax increases, and submitted that larger cuts should have been made to non-wage spending. Old Mutual Investment expressed disappointment at seeing the significant reduction in non-wage spending cuts versus the June’s budget.
    4. It concluded that there are commendable aspects of the MTBPS, but it believesthat the seriousness of the situation demand faster and more decisive action.


    1. The C19 People’s Coalition registeredits concern about the turnaround times in which the public is meant to be able to make submissions analysing documents that run into hundreds of pages. It said that the timeframe provided since the MTBPS speech was delivered was effectively 2.5 working days. It submitted that this was not conducive to participation in the budget process. It also alleged that formal participatory opportunities are after decisions have already been made with no to extremely slim chances of submissions having any impact whatsoever on decision-making.
    2. The C19 Coalition said that Parliament is meant to be a Parliament of the people, but it is largely inaccessible to the people who are meant to be represented. It said that it was telling that more people choose to demonstrate outside of Parliament or in their communities than participate in Parliament’s formal processes. It submitted that the formal public participation processes are so steeped in protocols that most people do not know how to relate to these participation opportunities. It said that there is a disjuncture between what the real struggles of societal stakeholders are, the way people naturally communicate them and the way it is expected that they should. It said: “We respectfully request that members give consideration to these challenges that are undermining public participation in general and participation specifically in the budget process. We urge Parliament to implement ways to improve public participation.”
    3. It then deferred its substantive comments to the Appropriations Committee, which it said gives more reasonable times for submissions. I noted that now was the worst time to cut back on social protection, as we witness the sharpest increase in joblessness, poverty and hunger in our country’s 26-year democracy. It said that it took particular exception to the cutting of the Caregiver’s grant, which has been an inadequate but essential lifeline to tens of millions of mothers and children in this country. The MTBPS should have moved in the opposite direction, i.e. it should have bolstered much needed social protection in a progressive move towards a Basic Income Guarantee, the C19 Coalition said. Insofar as this is justified by a lack of funds, the C19 Coalitions highlighted that denying the right to a basic income reflects a choice against other financing measures such as taxation.


    1. NT noted that public comments were about:
      1. Economic growth and reforms, particularly: the credibility of macro-economic and fiscal projections; the need for implementation of the reconstruction and recovery plan and; the role of government infrastructure investment plans in boosting aggregate demand
      2. Revenue and tax proposals particularly: the raising of taxes from wealthy and high-income individuals and large companies; the imposing of land tax instead of income taxes; an increase in the Health Promotion Levy and; the capacitation of SARS to deal with tax and customs evasion.
      3. Expenditure particularly: the implications of spending cuts on service delivery especially in 2021/22; how provinces and municipalities will absorb the spending cuts, intensify efforts to carry out expenditure reviews; zero-based budgeting approach implementation and alternatives; approaches for wage bill reductions and; proposals for achieving savings.
      4. Fiscal policy particularly:the mixed views on fiscal policy stance (austerity/stimulus); comments around the size of fiscal consolidation; the likely impact of fiscal consolidation on the economy and; establishment of a committee which focuses on inclusive fiscal policy.
      5. Other matters particularly:the concerns around SOCs continuing to be a drain on the fiscus; the R10.5billion proposed further allocations to SAA; the unresolved challenges faced by municipalities and; municipal debt to Eskom and water boards.
    2. With regards to the credibility of macroeconomic and fiscal forecasts, NT stated that compared to other institutions, its forecasts were more conservative than made out to be by stakeholders. It showed that besides the economic growth projections of South Africa by the World Bank and IMF, the Bureau for Economic Research (BER), SARB, Reuters and, Bloomberg had more optimistic forecasts and projections than the National Treasury. 
    3. On revenue, NT noted that there were a number of tax proposals raised in the public hearings which included an increase in the health promotion levy and its expansion to fruit juices and the increasing/decreasing of various categories of taxes and, the replacement of income taxes and vat with land taxes. NT responded that the MTBPS does not ordinarily deal with tax proposals as these are dealt with in the February budget. It reiterated that the 2020/21 Budget aims to raise additional taxes of R5 billion, and a further R35 billion over the medium-term.  NT assured that the proposals raised by stakeholders will all be considered when considering to raise revenue over the next four years.
    4. On expenditure, NT noted that in comparison with other comparable developing countries, South Africa’s average primary balance over the last 10 years fell in the middle of the distribution, but its projected three-year increase in debt was among the largest. It added that South Africa was losing ground to its peers.
    5. NT stated that over the past five year, the fiscal environment has seen interest payments absorbing a growing share of limited public resources, crowding out spending on social and economic investment. It stated that debt-service costs were not 4.8 per cent of GDP. There was also a sharp decline in public infrastructure investment as spending by state-owned companies declined. The government balance sheet was also deteriorating with option to stabilise the fiscus becoming increasingly limited as growth reforms were expected to yield only in a few years’ time. NT stated that since June, it has been conducting expenditure reviews across government in order to try and improve efficiency and had conducted 30 reviews so far.
    6. NT said that it will use spending reviews to inform zero-based budgeting. It said that expenditure reviews and zero-based budgeting will help to streamline bureaucracy, eliminate programmes that no longer add value and reform those in need of improvement. NT added government was committed to finalising the Public Procurement Bill during 2021/22.
    7. On the wage bill, NT explained that the public-service compensation spending grew more exponentially since 2004 to date to 11% of GDP. It said that the remuneration for employees in government tends to be higher than that of private-sector workers, explaining that more than 95 per cent of public servants earn more than the bottom 50 per cent of registered taxpayers. NT explained its plans to reduce the wage bill over the medium-term and had not implement the third year of the 2018 wage agreement and the matter was before the Labour Court and renegotiations were ongoing with the unions. 
    8. On the austerity/stimulus debate, NT argued emphatically that its policy stance since 2009 was expansionary, marked by a persistent and widening primary deficit. It also argued that spending more over the past 10 years has not led to economic growth, linking that with the quality of government spendingand emphasising the need for reforms and fiscal consolidation.



    1. The 2020 revised and proposed fiscal framework has been tabled merely 3 months after the adoption of the 2020 special adjustment budget that was passed by Parliament in July 2020. The special adjustment budget was presented in response to the health and socio-economic crisis wrought by the COVID-19 global pandemic. The Committee recommends that this report be read with its observation and recommendations in its special adjustment budget and the 2020 fiscal framework reports, where relevant.
    2. The 2020 MTBPS isthemed “securing economic recovery beyond Covid-19” and complements the third phase of the social and economic measures announced by President Ramaphosa in March and April this year, in response to the COVID-19 lockdown and an almost complete shutdown in economic activity.It was also presented after the Economic Reconstruction and Recovery Plan (ERRP) was tabled in Parliament by the President, debated and adoptedin October.
    3. The ERRP focusses on building infrastructure, expanding electricity generation, allocating the digital spectrum, and supporting rapid industrialization and employment, among others. It also seeks to ensure the implementation of the long-term structural reforms such as modernising network industries, reducing barriers to entry, and increasing regional integration and trade which the government plans to implement over the medium-term and longer.The Committee notes that “a detailed implementation schedule” has been developed and will be overseen by a council chaired by the President. The Committee further notes the announcement of “Operation Vulindlela”, an initiative between the Presidency and National Treasury, that will support the implementation of the ERRP. In this regards, the Committee strongly recommends that there be a clear implementation plan that can be monitored for the ERRP, with measurable timelines and outcomes. It also believes that all relevant departments and entities of government will align their strategic and annual plans with the priorities and objectives of the ERRP. The Committee will invite National Treasury for a more detailed briefing on “Operation Vulindlela” and the implementation plan of the ERRP.
    4. The Committee notes that although numbers from Statistics South Africa reflect that the unemployment rate has decreased from 29.0 per cent to 23.3 per cent, there are actually more people (5.2 million) of working age who are currently inactive as about 2.2 million people lost their jobs and many businesses shutdown during the COVID-19 lockdown. The Committee notes therefore that the decrease in the unemployment from 29.0 to 23.3 per cent is as a result of the narrow definition of the concept of employment and that unemployment has actually increased. The Committee believes that this will exacerbate inequality and poverty and calls for a more rapid and focussed implementation of the ERRP.
    5. The Committee welcomes that the ERRP also focusses on re-industrialisation and localization as some of the key pillars of our national reconstruction and inclusive economic recovery strategy. The Committee believes that there should be significant emphasis on building our domestic productive capacity and vvalue for money must always remain a key consideration. There also needs to be a “buy local campaign” for the state, private sector and consumers. In this regards, the Committee once again reiterates its recommendation that members of the executive and government officials should use cars manufactured or assembled in South Africa for official use.
    6. While the Committee notes that the assigning of the high-demand digital spectrum and reducing the cost of broadband and other costs of doing business forms part of the measures of the ERRP, it is still concerned at the slow pace of the auctioning of the digital spectrum and persistent high costs of broadband to consumers. The Committee reiterates that NT needs to engage with the Department of Telecommunications and Postal Services on this. Given the desperate need for revenue, the Committee urges government to accelerate the auctioning of the digital spectrum.
    7. The Committee notes that the country’s economic outlook has unsurprisingly deteriorated further since the tabling of the special adjustment budget in June. Real GDP is now expected to contract by 7.8 per cent compared to -7.2 per cent. GDP growth is expected to rebound to 3.3 per cent and moderate at 1.7 per cent and 1.5 per cent in 2022 and 2023 respectively. The Committee believes that government alone cannot ensure the necessary economic growth. Parliament, the private sector, trade unions, other sections of civil society and the public all have a role to play. However, government has to lead in this regard and policy certainty is imperative in order to revive business confidence and stabilize investment.
    8. The Committee notes that revenue projections have been downwardly revised from those of Budget 2020 and the special adjustment budget (Please read with 8.11. below). The consolidated revenue is expected to decline from R1 398.0 trillion projected in the 2020 Budget to R1 276.7 trillion in the MTPBS, a decline of R121.0 billion. The gross tax revenue is expected to be 17.9 per cent lower than collections in 2019/20, or R312.8 billion below the 2020 Budget forecast. The Committee further notes that over the medium-term, revenue is expected to recover and reach R1457.6 trillion in 2021/22 and R1595.8 in 2020/23.
    9. The Committee notes that the government’s consolidated expenditure as a percentage of GDP is projected to increase from 35.9 per cent or R1.85 trillion in 2019/20 to 41.9 per cent or R2 trillion in 2020/21. This would sharply raise the consolidated budget deficit from the projected 6.8 per cent of GDP in the 2020 Budget to a whopping 15.7 per cent of GDP in the current year, moderating at 7.3 per cent over the medium term. Further, in the current year, gross national debt is projected to reach 81.8 per cent of GDP, up from 65.6 per cent of GDP projected in Budget 2020. It is expected to reach 93 per cent of GDP or 5.54 trillion in 2023/24.
    10. All these figures are concerning but not surprising in the wake of the COVID-19 pandemic,that has affected all countries across the world, combined with South Africa’s economic climate just prior to the pandemic, which included the sovereign credit rating downgrades of South Africa by the credit rating agencies. The Committee reiterates that it is aware of a looming sovereign debt crisis and also wants to avoid that happening, as it recognizes that ultimately it is the poor and low-income earners that will suffer disproportionately. The Committee also notes that financial support to SOEs without clear turnaround plans has already been flagged by the Finance Minister as unsustainable and undesirable. The Committee’s views on the revised and proposed fiscal framework are directed towards balancing the stresses on the budget and addressing the immediate and longer-term needs to grow the economy, create jobs and significantly reduce the inequalities in our country, by also taking into account submissions received during the hearings. 
    11. Various stakeholders who participated and gave input to the Committee’s public hearings on the MTBPS felt that the forecasts by National Treasury were optimistic (or over-optimistic). The Committee has expressed itself on this in its previous fiscal framework reports. In its 2019 MTBPS report the Committee said that:

“For several years now, National Treasury’s GDP growth forecasts have been overestimated and this had various repercussions, including for the country’s financing needs…By National Treasury’s own admission, economic growth forecasts carry with them huge economic and fiscal risks, which will most likely negatively affect the credibility of the fiscal framework, if they materialise. The risks identified previously, always materialised, leading to huge revenue shortfalls, a fiscal framework that cannot be trusted and expenditure plans that are not implementable.”

The Committee reiterates these sentiments as NT has itself confirmed that in the last ten years, spending was predicated on an economic growth rate that did not materialise.

  1. The Committee believes that the high debt levels that South Africa has accumulated should be reigned-in in order to avoid a debt-trap and the high debt servicing costs, which are fast crowding-out other expenditure items as a percentage of GDP. The Committee notes that NT proposes a five-year fiscal consolidation pathway in order to bring debt under control through spending cuts of R60 billion in 2021/22, R90 billion in 2022/23 and R150 billion in 2023/24 and constrained spending growth over the last two years. The Committee welcomes that this five-year proposal has slightly eased from the three-year proposal in the special adjustment budget with the addition of R37 billion in 2021/22 and R66 billion in 2022/23 to the main budget expenditure. The Committee agrees with some stakeholders that the ERRP could be hampered by a fiscal policy framework that is focussed on fiscal consolidation and debt reduction challenges.
  2. The Committee notes that there are mixed views on these proposed budget cuts, with reasonably strong opposition from some quarters since the majority of the cuts are effected on the wage bill. The Committee notes further that the third year of the 2018 wage agreement has not been implemented and the unions have approached the Labour Court on this. The Committee further notes COSATU’ssubmission that the source of the fiscal challenges that South Africa faces is not the wage bill that is now being targeted. The Committee notes further that according to the PBO’s analysis, the public sector wage bill has declined from 38 per cent in 2000/01 to 33.9 per cent of total government expenditure in 2019/20. The Committee calls on NT and the Department of Public Service and Administration to follow due process in negotiating the proposed cuts with unions given that more than 80 per cent of the targeted wage reductions are in labour-intensive areas of learning and culture, health and peace and security. The Committee reiterates its view that government and labour need to negotiate inan amicable in a “give and take” approach that takes into account the Covid-19 economic circumstances as the absence of this agreement can undermine government’s economic recovery programme.
  3. The Committee notes that there are strong views about the fiscal consolidation path that NT has proposed. Many participants in our public hearings and written submissions urged government and NT to reconsider its fiscal consolidation measures and provide credible demand-side interventions to stimulate the economy. There is a sense, it is argued, in which National Treasury claims that its budgets are expansionary when it has been implementing fiscal consolidation measures over some time now. In its response to these submissions NT has emphatically claimed that it fiscal stance has over the past decade been expansionary. In its response to the special adjustment budget submissions, NT said that: “Calls for more government spending are based on the incorrect assumption that South Africa suffers from short-run cyclical demand challenges rather than long-run structural weaknesses in the economy”. This austerity/stimulus debate has been ongoing for some time now and the Committee believes that there is a need for the resolution of the impasse and some consensus. The Chairperson of the Committee will confer with other relevant committee Chairpersons (finance and appropriation) of Parliament on the need for a workshop outside of the tight parliamentary budgetary processes to discuss this issue with input from experts supporting each side. The purpose of this workshop will be to empower members to make informed judgments of the opposing views in this debate.
  4. The Committees notes that NT has already conducted several expenditure reviews and its findings from these reviews will help inform its zero-based budgeting process that will be piloted in some departments in the next financial year. The Committee will request a more detailed briefing on the lessons-learnt from these expenditure reviews and the implementation of zero-based budgeting.
  5. The Committee notes that R10.5 billion has been allocated in the current financial year towards South African Airways’ business rescue process. The Committee however notes that very little has been said on how this money will be spent. The Committee will confer with the Committee on Public Enterprises on a joint briefing by NT and the Department of Public Enterprises onthe details of the use of this R10.5 billionsoon.
  6. The Committee notes the details provided in the risk statement provided in the MTBPS on the contingent liabilities posed by state-owned companies, particularly on the Airports Company South Africa, Eskom, Land Bank, the Road Accident Fund and the South African National Roads Agency Limited (SANRAL). The Committee believes that Parliament should receive reports on SOE reform plans given their downside risks on the fiscus.The Committee will confer with the Portfolio Committee on Public Enterprises on a joint briefing on SOE restructuring by the Department of Public Enterprises and National Treasury. The Committee further recommends the speedy establishment of the proposed Presidential State Owned Enterprises Council whose task will be to provide strategic oversight of state-owned companies and ensure that their dependence from the fiscus is eliminated. 
  7. The Committee reiteratesits disappointment that there has only been 8% take up of the loan guarantee scheme of R200 billion.  The Committee requires NT to report to it on its renegotiation of the lending criteria with the participating commercial banks. The Committee recommends that the Minister considers the expansion of this loan guarantee scheme to directly include Development Financial Institutions (DFIs) being able to provide liquidity to projects that they are directly funding.
  8. As stated in its special adjustment of July 2020, the Committee welcomes the monetary policy and financial regulatory and stability interventions by the SARB, which have ranged from the reduction of the repo rate to its activities in the bond markets which have respectively lowered interest rates by 250 basis points and lowered bond yields in this regard. Given the balanced inflation outlook, the Committee believes that there is still more policy space for the SARB to act decisively to ensure liquidity and stimulate the economy. The Committee reiterates its view expressed in the special adjustment budget report that the interest rates spreads remain high and commercial banks could consider cutting them in view of the unprecedented crisis confronting the country.
  9. The Committee reiterates its view expressed in its special adjustment budget report that “government should engage with all stakeholders, including the private sector on how to unlock domestic investment through impact investments and Regulation 28 of the Pension Funds Act. NT needs to consider creating the necessary regulatory mechanisms to ensure increased pension fund investments directly into infrastructure projects including real estate, which can unlock capital that currently is not finding its way into projects. The majority in the Committee believes there should be more engagement on the feasibility of prescribing assets for pension funds and will request a presentation by the Financial Sector Conduct Authority (FSCA) and NT on this when the FSCA releases the policy paper as announced by the Minister of Finance in his post-adjustment budget briefing to the Committee. National Treasury should also consider how pension fund members can leverage their retirement fund assets to improve their personal financial circumstances...”
  10. While the MTBPS does not deal with tax proposals, the Committee notes the proposals made by stakeholders during the MTBPS parliamentary submissions and the assurance from NT that these proposals will be taken into consideration when looking at measures to raise more revenue over the next four years. In view of the persistent representations by Mr Meakin for a “land only tax system” and NT’s inadequate replies to this in Committee meetings, the Committee recommends that NT reply to Mr Meakin in detail and give the Committee a copy of this. The Committee does not agree with Mr Meakin’s views and believes that as it would require an overhaul of the entire tax system it can be dealt with through NT’s processing of the Davis Tax Commission.The Committee is sympathetic to submissions on the Health Promotion Levy.
  11. The Committee requires NT (and SARS) to update it in the 2021 Budget Review on the developments in resolving the impasse on the taxing rights of countries when it comes to income derived from digital activities. The Committee is aware that South Africa is one of the few countries that are already collecting VAT from the digital economy and commends this. The Committee recommends that while NT participates on the Organization for Economic Cooperation and Development (OECD), it should work in collaboration with African Tax Administration Forum on the digital tax framework. 
  12. In all its fiscal framework and revenue proposals reports, this Committee,and its predecessor in the Fourth Parliament, has repeatedly raised the need to tackle the illicit economy more actively in order to stem the flow of billions of Rands out of the country. The Committee emphatically reiterates this and urges the President to consider establishing an inter-ministerial committee (IMC) to tackle Illicit Financial Flows (IFFs). The rationale behind proposingthe IMC is that the work on IFFs cuts across various Ministries including Finance, Justice, Police, Trade and Industry, and Minerals and Energy and various state institutions such as the South African Reserve Bank, the Financial Intelligence Centre, the National Prosecutions and, the Assets Forfeiture Unit, among others. The Committee recommends that the work of this inter-ministerial committee pay particular attention to aggressive tax avoidance including Base Erosion and Profit-Shifting (BEPS) by multi-national companies. The Committee further recommends that the work of the IMC be jointly overseen by the relevant committees of Parliament.
  13. The Committee believes that the recent procurement challenges and alleged corruption related to the purchasing of personal protective equipment (PPE) by various government departments during the COVID-19 have shown the urgency needed in reforming and modernizing the government’s procurement system. In this regard, the Committee reiterates its call for NT to expedite the tabling of the Public Procurement Bill. The Committee further encourages law enforcement agencies to expedite investigations on corruption and ensure asset recovery and the slow pace of justice is impacting negatively on economic sentiment.
  14. The Committee notes that there were a number of issues raised by stakeholders during its public hearings, some of which belonged to the Appropriations Committees. These include issues on municipalities and on the resourcing of the District Development Model, and the extension of top-up grants. The Committee will refer these issues to the Appropriations Committee.  
  15. The Committee thanks all those who participated in its processes.


Report to be considered.

The DA reserves its position

The EFF and FF Plus reject the report

Having considered the 2020 revised fiscal framework and 2021/22-2023/24 proposed fiscal framework, the Select Committee on Finance adopt the 2020 revised fiscal framework and 2021/22-2023/24 proposed fiscal framework as presented.



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