Cape Town - Briefing briefing Parliament, a day after the medium term budget statement, the Finance Ministry said it sought to increase capital investment by stabilising government debt.
Finance Minister Enoch Godongwana alongside Treasury Director-General Duncan Pieterse addressed the Parliament’s Standing Committee on Finance, the Standing Committee on Appropriations, the Select Committee on Finance, and the Select Committee on Appropriations.
Pieterse said the medium term fiscal strategy would focus on fiscal sustainability, supporting economic growth, and maintaining the social wage, which is at around 60% of non-interest expenditure.
A key priority area was debt service costs, the single largest expenditure item, he added
“We also plan to increase the levels of capital investment by stabilising debt. Why is that important for capital investment? Because it reduces the interest rates in the economy and therefore the cost of capital and it therefore makes it cheaper for the State and for the private sector to invest in infrastructure.”
“The public service wage bill needs to be prioritised by ensuring that public servants are compensated fairly while making sure that the growth is sustainable.”
On Wednesday Godongwana delivered the MTBPS, a critical component in the overall budget process as it sets out the policy framework for the budget presented annually in February.
Godongwana said: “We’re doing a lot of things, particularly on the redistributive side. We’ve got a social wage which is massive…The sustainability of that requires growing the economy and what that means is that we, all of us have to redirect our focus on that. To sustain the social wage and redistribution, we need to grow the economy.”
“Obviously, all other sectors of the economy need to be part. For instance, you may inquire, we have not said anything about tourism but tourism also requires a conducive environment. E-visas, it requires less crime.
“Somebody may say, you have not said anything about poverty and unemployment, those are functions, if you deal with the (economic) growth issues, you are likely to deal with poverty and unemployment.”
Currently, debt service costs have to be contained, Godongwana said.
Pieterse said there was some limited additional financial support to SANRAL. “SANRAL has for the last few years, has not been able to implement its toll projects, the Huguenot Tunnel in the Western Cape, the Mariannhill Toll Plaza in KZN, because of their balance sheets constraints and they have been constrained on their nontoll portfolio,” said Pieterse.
He said this would allow SANRAL to unlock a project pipeline of over R80 billion over the next three years.
Other spending additions included was to Parliament’s budget over the next two years, as well as to the budget of the Office of the Chief Justice, to address operational requirements.
Consolidated government spending is expected to increase from R2.4 trillion in 2024/2025 to R2.77 trillion in 2027/2028. Over the same period, revenues are anticipated to underperform compared to the 2024 Budget projections.
Over the medium term, the gross borrowing requirement will average R557.5 bn or 6.5% of the GDP. Domestic long-term borrowing is expected to increase to R330.7 bn in 2025/2026. This excludes the R70 bn Eskom debt takeover in the same year. It will thereafter decline to R320.4 bn in 2026/2027 before increasing to R472.2 b in 2027/2028.
shakirah.thebus@inl.co.za
Cape Argus