Minibudget 2014

Economic forecasts

• Real GDP revised downwards to 1.4% in 2014 (from 2.7% in Feb); 2.5% in 2015, 2.8% in 2016 and 3% in 2017
• Inflation expected to return to target band in medium-term: 6.3% in 2014, 5.9% in 2015, 5.6% in 2016 and 5.4% in 2017
• Current account deficit as % of GDP to narrow: -5.6% in 2014, -5.4% in 2015, -5.2% in 2016 and -5% in 2017

Revenue

• Revised revenue estimate is R956 billion, leaving deficit of R180 billion
• Surpluses of social security funds, provinces and public entities estimated at R27 billion
• Consolidated budget deficit R153 billion, or 4.1% of GDP
• Revenue estimate R1 055.1 billion in 2015/16, R1 169.4 billion in 2016/17 and R1 272.9 billion in 2017/18

Spending

• Budget deficit to decline over next three years: -4.1% in 2014/15, -3.6% in 2015/16, -2.6% in 2016/17 and -2.5% in 2017/18
• Expenditure R1 136.3 billion in 2014/15, R1 222.3 billion in 2015/16 and R1 308.4 billion in 2016/17
• Government expenditure to grow by 7.6%pa over next three years to reach R1.55 trillion by 2017/18
• Fiscal package reduce previous budget for 2015/16 by R10 billion and for 2016/17 by R15 billion
• Largest allocation over term is basic education (15%), health (11%) and social protection (11%)

Foreseeable expenditure

• R157 million on the Cooperative Governance vote to repair infrastructure damaged by disasters and R35 million for emergency water and sanitation interventions;
• R32.6 million for Ebola control and prevention measures
• R350 million for International Relations and Cooperation to compensate for depreciation of the Rand

Cost cutting measures

• Freeze budgets of non-essential goods and services at 2014/15 levels
• Withdraw funding for posts that have been vacant for some time
• Reduce the rate of growth of transfers to public entities, particularly those with cash reserves.
• Across national departments, planned expenditure on travel, conference venues and catering has been cut 
• Advertising and communications budgets reduced
• Consultant services capped
• These steps contribute to savings of R1.3 billion over two years

Debt

• Debt as percentage of GDP to reach 42.8% in 2014/15, 44.6% in 2015/16 and 45.4% in 2016/17
• Debt stabilising at 45.9% of GDP in 2017/18 and declining thereafter.
• Debt-service costs to grow 9.3% per year – faster than the budget as a whole – reaching about R150 billion in 2017/18.

Fiscal package to reinforce sustainability

• Reduce growth in spending.
• Adjust tax policy and administration.
• Strengthen budget preparation.
• Freeze government personnel headcounts.
• Adopt a deficit-neutral approach to financing state-owned companies.

SOEs

• Eskom to borrow R250 billion over next five years, supported by existing guarantees from government
• Government to provide at least R20 billion of funding to Eskom, raised through sale of non-strategic assets
• Financial assistance to municipalities for free basic services to continue
• New framework envisaged to distinguish commercial activities of SOEs from development mandates
• Steps taken to address issues at SAA, SA Express, SA Post Office and Land Bank

African Bank

• Government has not provided any funds to bail out African Bank, but has provided a R7 billion backstop to the Reserve Bank in line with international practice.
• It is unlikely that the Reserve Bank will draw on this facility, and no costs to the taxpayer are expected.

Corruption

• Strengthened measures to identify, prevent and combat corruption in both the public and private sectors.
• Over the next three years, the Office of the Chief Procurement Officer will roll out a new national approach to procurement

article sourced on moneyweb