23 February 2022
The ANC Parliamentary Caucus welcomes the Minister of Finance’s Budget Speech delivered on behalf of the Executive today, Wednesday 23 February 2022 in the Good Hope Chamber in Parliament.
On the economic outlook, we take note of the tough economic conditions but believe we have the necessary capability to rise to these conditions. In particular, the implementation of structural and regulatory reforms will contribute to the prediction that the economy is expected to reach pre-pandemic levels of GDP this year. The predicted growth of 2,1% is better than the 2021 MTBPS prediction.
Our concerns remain rooted in the unemployment situation and that 78% of the jobless are defined as being long term employed.
We are pleased to see that household consumption has grown by 5,6% in 2021 and is expected to grow by 2,5% in 2022. This is a major driver in the economy and a positive signal for demand side growth.
We welcome the progress recorded with the Economic Reconstruction and Recovery Plan and in particular, interventions in energy security which will produce an additional 6,700 MW and bring in private sector investment of R128 hillion over the Medium-Term Expenditure Framework.
The additional support to Eskom is linked to debt service costs but also the reform of the electricity sector and Eskom’s own turnaround strategy.
The progress report on Infrastructure Growth and 55 new Infrastructure projects with investment value of R595 billion is welcomed as part of the ANC’s economic strategy of infrastructure led growth. We note that 1/3 of the 62 strategic infrastructure projects gazetted in 2020 are under construction and that the projects in the early stage of development are receiving attention.
Responding to this, Public Sector Infrastructure spending over the MTEF is estimated at R812 billion. R6,7 billion in financial support has been approved. The concern is that public-private partnerships have been declining from R10,7 billion in 2011/12 to R5,6 billion in 2019/20.
Our concern over private Investment remains. It has contracted in the 3rd Q of 2021 and remains R84 billion below pre-pandemic levels. Private sector investment, the largest component of fixed capital investment, accounts for 84% of the shortfall. The reasons are being addressed and it is expected that this should improve going forward.
We welcome the small business loan guarantees of R15 billion that will be facilitated through participating banks and development finance institutions and that the impediments of 2020 have been sorted out.
Like many others, we must be concerned that, since 2013, frontline services and infrastructure have been reduced by R257 billion.
On sector performance and outlook, Budget 2022 reflects a positive report across key sectors who contribute to the real economy and this is encouraging. With the exception of construction, all reflect growth.
On the Budget Framework over the Medium-Term Expenditure Framework, largely as a result of increased revenue, we welcome that the Consolidated Budget Deficit will narrow from 6% to 4,2% in 2024/5.
Budget 2022 speaks to the poor and vulnerable in that it increases the Social Wage to 59% of total non-interest spending. This is aimed at addressing poverty and unemployment and to support economic recovery. Half of the population now receive at least one grant from the state.
On spending programmes, we welcome the Medium-Term allocation of R76 billion for job creation programmes. In addition, R18 billion is made available for the Presidential Employment Initiative totalling R94 billion.
We welcome the R110 billion set aside for spending priorities, these include; the Covid-19 social relief of distress grant, which is extended for another 12 months; bursaries for students benefiting from the NSFAS and the Presidential Employment Initiative. Additional R32 billion financial support to current bursary holders and first year students under NSFAS.
We note that Economic Development and Community Development are amongst the fastest growing items in the Budget and welcome this as well as welcoming increases in the budget for Education, Health and the Presidential Employment Initiative. There is an additional R24 billion for provincial education departments to address shortfalls in the compensation of teachers and the matter of R3 billion to absorb medical interns and community service doctor’s addresses concerns that have been raised.
We welcome the almost R9 billion that has been added to the police budget.
On Taxes and Revenue proposals, both commodity prices and the commendable work of SARS has resulted in a R182 billion higher than predicted revenue income. We note that, much of this has been used on expenditure but, also a portion has been used to address the deficit. This will be the first time since 2015 that extra revenue is being used to reduce borrowing.
We welcome the R5,2 billion in tax relief to support economic recovery; secondly to provide relief from fuel tax increases; and thirdly boost incentives for youth employment. The Employment Tax Incentive will be expanded through a 50% increase in the maximum monthly value. The expansion will provide additional support worth R2 billion.
For consumers, firstly we welcome that the tax-exempt threshold has been lifted to R91,000 and that tax relief is provided through adjustment in PIC and rebates. The positive move not to increase the Fuel Levy and Road Accident Fund Levy will be broadly welcomed.
For local government, there is a positive additional R29 billion for basic municipal services which goes to the local government equitable share. These funds are for providing services to the people.
We further welcome the announcement that the Financial Action Task Force is addressing weaknesses in fighting fraud and money laundering identified in the evaluation of the anti-money laundering system.
Finally on financial sector reforms, both the amendments to Section 28 of the Pension Funds Act to allow for productive investments in particular infrastructure. We also welcome the further fundamental restructuring of the retirement system to allow for greater preservation and partial access.
Issued by the Office of the Chief Whip, Hon. Pemmy Majodina
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Nomfanelo Kota +27 (0) 67 415 1089