South Africa’s Minister of Finance, Tito Mboweni, delivered the 2020 Supplementary Budget review, on 24 June 2020. This was planned and tabled in response to significant changes in projected revenue generation and expenditure channelling in the aftermath of the Covid-19 outbreak, and was aimed at managing and tackling the immediate challenges facing the treasury.
Some of the significant highlights from the supplementary budget review include the following:
National Treasury now anticipates spending to increase from the R1,537 trillion expected in the February 2020 budget to R1,573 trillion. The increase represents primarily the assistance provided to state-owned entities, the COVID response efforts and the costs of servicing debt. Although the rise in the overall spending represents a rise of R36bn, the cumulative fiscal response to the pandemic has resulted in additional R145bn of spending. Of this number, R122bn was allocated to the fiscal relief package, R3bn to the restructure of the Land Bank, and R19.5bn to temporary allocations for Covid-19 fiscal aid. National Treasury has been able to reprioritise R109bn, with the remaining R36bn to be funded by increasing the main budget deficit. Government spending was adjusted through the implementation of various measures.
The shortfall was higher than was anticipated; tax reprieve initiatives, company closures and lower personal income taxes due to mass retrenchments are projected to result in the current financial year’s R304.1 billion tax shortfall. National Treasury noted that the highest shortfalls had been seen in domestic VAT and Pay-As-You-Earn tax categories.
National Treasury anticipates that tax collections will increase over the medium-term expenditure framework (MTEF) based on improved tax collection. This includes, among others, enhancement of enforced compliance and revenue collection measures which will be introduced, for example, to eliminate syndicated fraud related to value-added tax refunds and import valuations.
Although the supplementary budget painted a more serious picture of the existing conditions, it did not contain much information about how President Ramaphosa’s administration intends to deal with the Herculean task of “closing the mouth of the hippopotamus.” However, The Minister of Finance revealed that more information will be supplied in the Medium -Term Budget Policy Statement (MTBPS) expected in October 2020, on how the government plans to simplify the budget.