Province of KwaZulu-Natal Budget address by Ms B.F. Scott MEC for Finance, on tabling of the 2019/20 MTEF Budget in the Provincial Legislature 7 March 2019
Madame Speaker,
Honourable Members,
Global and national outlook
Two weeks ago, while tabling the national budget, the Honourable Minister of Finance, Mr Tito Mboweni said that we had expected economic growth of 0.7% in 2018 and that this is still our estimate.
We now expect a slower, but still steady recovery after the 2018 technical recession, with real GDP growth in 2019 expected to rise to 1.5% and to strengthen moderately to 2.1% in 2021.
Similar to most developing economies, South Africa’s economic outlook is vulnerable to both internal and external risks and, with world growth expected to slow down, our growth forecast will continue to be constrained.
Risks to the national outlook
The upside is that some of our risks can be managed through the steadfast implementation of reforms and positive policy directions as outlined by His Excellency the President, Mr Cyril Ramaphosa, in his State of the Nation Address (SONA) earlier last month, and by the Honourable Minister Mboweni in his budget speech.
These include reforms around ESKOM, managing the growing public service wage bill, among others. External downside risks relate to an increase in oil prices, ongoing foreign trade tensions, volatile commodity prices and so forth.
Furthermore, higher interest rates in Europe and the US could affect the financial markets and the exchange rate through capital outflows. On the upside, the implementation of proposed structural reforms could reduce remaining policy uncertainties and stimulate domestic demand through higher-than-expected investment.
Honourable Minister Mboweni alluded to the challenge posed by the debt-to-GDP ratio, and indicated that this needs to be managed efficiently. He outlined ways in which government spending would be reduced, including a reduction in the government wage bill, as mentioned, while also reducing spending on specific programmes.
I think we all understand how essential it is for us to control our debt, and provinces are expected to play their part, especially in areas such as controlling our wage bill and stimulating the economy.
During the tabling of the national budget last month, Honourable Minister Mboweni indicated that the budget deficit for the next financial year is estimated to be an average of 4.3% of the country’s GDP, and interest payments on government debt would amount to 3.6% of GDP. With the proposed revenue enhancements and the plan to control government spending, the budget deficit is projected to narrow slightly from 4.2% of GDP in 2018/19 to 4% in 2021/22.
Infrastructure
One way of addressing our country’s growth prospects is to inject more funding into infrastructure projects. Sustainable growth is of utmost importance, not only to South Africa’s fi scal challenges, but also to the broader socio-economic needs of our people.
Measures to stimulate the economy have been pronounced by national government, with more attention directed at inter alia: infrastructural development through the infrastructure fund; easing of visa regulations to enable business travel and thus stimulate the tourism sector; injecting public spending into agriculture; and, re-developing township economies.
This is further supported by the recently initiated investment strategy aiming to attract both foreign and domestic private investment. Thus, as announced by both His Excellency the President and the Honourable Minister of Finance, the infrastructure fund will be a central pillar of the budget and so will reprioritization of government spending in general.
Government will accelerate R526 billion worth of on-budget projects by bringing the private sector and development finance institutions on board. In several instances, the private sector will design, build and operate critical infrastructure assets.
In addition, the government will commit R100 billion over the next decade. Minister of Finance, the infrastructure fund will be a central pillar of the budget and so will reprioritization of government spending in general.
Government will accelerate R526 finance institutions on board. In several instances, the private sector will design, build and operate critical infrastructure assets. In addition, the government will commit R100 billion over the next decade. Read more [PDF]
