Cape Town - Finance Minister Tito Mboweni is answering questions in response to his 2021 Budget Speech delivered on Wednesday.
Mboweni has walked a tight rope in his Budget with measures to cut down on expenditure and plans to reduce debt in the next five years.
He said on Thursday this was not an austerity Budget as had been alleged by others, saying if that was the case they would have cut down on social grants.
But in the Budget Review government has given Eskom a bailout of R31.7 billion, SAA another R4.3bn and the Land Bank a bailout of R7bn.
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Mboweni did not mention the bailouts in the speech, but the details are contained in the Budget review.
This is despite opposition parties calling for an end to the bailouts.
“Government allocated R56bn to Eskom for 2020/21 and allocated R31.7bn for 2021/22, subject to compliance with the conditions of the Special Appropriations Act,” reads the Budget review.
In the review Treasury said they have extended the R350 grant for the unemployment until April, but wanted to bring down debt levels with debt servicing costs now exceeding health expenditure.
In his speech, Mboweni said they have allocated R10bn to procure vaccines in the fight against Covid-19 in the next two years. Due to the uncertainty of the pandemic, government has increased contingency reserves from R5bn to R12bn.
They expect the economy to rebound with growth of 3.3% this year. The government would not increase taxes.
But Mboweni also announced an increase in sin taxes.
“From today, a 340ml can of beer or cider will cost an extra 14c, a 750ml bottle of wine will cost an extra 26c, a 750ml bottle of sparkling wine an extra 86c, a bottle of 750 ml spirits, including whisky, gin or vodka, will increase by R5.50,” said Mboweni.
He added: “A packet of 20 cigarettes will be an extra R1.39c, 25g of piped tobacco will cost an extra 47c and a 23g cigar will be R7.71 more expensive.”
The debt will continue to rise from 80% of gross domestic product (GDP) to 88.9% in the next five years.
“Debt is now expected to stabilise at 88.9% of GDP in 2025/26-down from a projected 95.3% of GDP estimated in the 2020 MTBPS (medium-term Budget policy statement). This is as a result of a decline in the tax revenue shortfall since the tabling of the MTBPS, which resulted in improved cash balances,” stated the Budget review.
The review said the public sector wage bill will be reduced by R303bn in the next three years. However, this year the government and unions would enter into a new round of wage negotiations and the outcome was unclear.
The National Treasury said the wage bill consumed the large portion of the budget and must be reduced.
The government and unions were in loggerheads after the unions accused the government of reneging on the 2018 agreement to increase salaries for public servants.
Mboweni said Public Service and Administration Minister Senzo Mchunu was in discussions with the unions on the new wage talks this year.
The narrowing of the Budget deficit would also be key in reducing expenditure, said the review.
Despite the poor performance of the economy last year after the implementation of the lockdown, Mboweni expects a rebound of the economy. He said he expected the economy to grow by 3.3% this year after a decline of 7.2% last year after Covid-19 hit the country.
With no tax increases, the government raised an additional R100bn in taxes after the economy reopened. This is higher than projected in the MTBPS in October, said the review.
Mboweni said the social grants would also be increased.
Mboweni said the old-age, disability and care dependency grants would be increased by R30 to R1 890.
The war veterans grant will also get a hike of R30, to R1 910, while the child support grant will go up by R10 to R460 and the foster care grant will increase by R10 to R1 050.
Political Bureau