Finance Minister Enoch Godongwana delivered the 2023 Medium-Term Budget Policy Statement (MTBPS) on Tuesday, outlining the government’s fiscal and economic strategies for the coming years.
Five key takeaways from the 2023 Medium Term Budget Policy Statement
Here are five key takeaways from the statement that hold critical implications for the country’s future.
1. Stabilising Public Finances
One of the most prominent themes was the government’s commitment to stabilising public finances.
The MTBPS outlined measures aimed at reducing the budget deficit and curbing the rising debt service costs.
It also acknowledged a shortfall in corporate income tax, particularly from the mining sector, which has led to a weaker financial outlook.
“The result of the shortfall is a substantial worsening in the main budget deficit in the current fiscal year. We are now projecting a deficit of 4.9 per cent of GDP compared to our previous estimate of 4.0 percent,” Godongwana revealed.
2. Economic and Fiscal Context
The economic outlook remains challenging, both domestically and globally.
South Africa’s real GDP is expected to grow by just 0.8% in 2023. The MTBPS mentioned the cumulative effects of loadshedding, logistics sector underperformance, and global economic challenges as contributing factors.
It stressed the need for fast-tracking growth-enhancing reforms and reconfiguring the state structure.
“A joint plan to review government departments, entities and programmes over the next three years is being prepared.
“This plan will address overlapping mandates and functions, including in public entities, and ensure that we create standards for more sustainable remuneration of executives that serve public entities receiving transfers from the fiscus,” the finance minister said.
3. Infrastructure Investment
A significant focus was placed on infrastructure investment to support higher economic growth.
The government plans to introduce new mechanisms to attract private-sector financing and expertise into public infrastructure projects.
This includes changes to Treasury Regulations and municipal legislation, aiming for a more effective delivery mechanism.
“We are also establishing an Infrastructure Finance and Implementation Support Agency that will systematically address the need to crowd-in private sector finance and expertise into the public infrastructure programme,” Godongwana emphasised.
4. Fighting Crime and Corruption
The MTBPS highlighted the government’s dedication to crime reduction as a vital component of economic growth.
Measures are being undertaken to strengthen the nation’s ability to fight organised crimes and illegal financial flows.
This focus is also in line with the Financial Action Task Force (FATF) recommendations, which South Africa aims to address by 2025 fully.
“The FATF noted at its plenary meeting last week that such work is showing positive results, with South Africa having addressed 15 of the 20 technical deficiencies in our legal framework, and making good progress on 17 of the 22 effectiveness action items, including 2 that are now deemed to be largely addressed,” the minister highlighted.
5. Social Welfare and Employment Programs
Despite the financial constraints, the government is allocating funds to sectors that are personnel-intensive, such as Health, Education, and Police Services. These include:
- Additional funding of R24 billion this year and R74 billion over the medium term will be used to fund the 2023/24 wage increase and the associated carry-through costs in these sectors.
- R34 billion is allocated to extend the COVID-19 Social Relief of Distress grant by another year. Over the medium term, a provisional allocation is retained while a comprehensive review of the entire social grant system is finalised.
- The presidential employment initiative will be extended for another year through the repurposing of a portion of funds from existing public employment programs such as the Expanded Public Works Programme and the Community Works Programme. A comprehensive review of public employment programmes is underway.
What is the Medium-Term Budget Policy Statement?
The Medium Term Budget Policy Statement (MTBPS) is a crucial government document presented annually, usually in October.
It serves as a snapshot of South Africa’s economic health and outlines the government’s fiscal strategies for the coming three years.
Unlike the annual budget, which provides detailed allocations of government spending, the MTBPS offers a broader, more strategic view of public finances. It includes economic forecasts, revenue and expenditure estimates, and key policy priorities, among other things.
The MTBPS is essential for several reasons:
Guiding Future Policy
It serves as a guide for future policy direction and provides insights into the government’s priorities and strategies for the medium term. This includes anything from social welfare programs to infrastructure investments and tax reforms.
The MTBPS is tabled before Parliament, providing an opportunity for legislative oversight and public scrutiny. This ensures that the government’s fiscal policy is aligned with national priorities and that there is accountability for public spending.
For the markets, it provides valuable signals about the government’s commitment to fiscal discipline, which can influence investor sentiment and economic stability.
For government departments and agencies, it serves as an essential planning tool, helping them align their programs and spending with the country’s broader economic objectives.
Why is it Significant to the Ordinary South African?
Impact on Public Services
The MTBPS directly impacts the quality and availability of public services like healthcare, education, and social welfare. For example, if the government decides to prioritise healthcare spending, it could lead to better facilities and services at public hospitals.
The statement’s focus on economic stability and growth has a trickle-down effect on job creation and income levels, affecting the livelihoods of millions of South Africans.
Cost of Living
Taxation and public spending policies outlined in the MTBPS can influence inflation and the cost of living. A commitment to fiscal discipline can help maintain price stability, which is crucial for low and middle-income households.
Social Welfare and Grants
Many South Africans rely on social grants and welfare programs. The MTBPS often outlines changes or continuations in these areas, offering a glimpse into how these crucial support systems will be affected.
Infrastructure and Development
Infrastructure projects like roads, electricity, and water supply are often highlighted in the MTBPS. These not only create jobs but also improve the quality of life for ordinary South Africans.