LIVE | Mboweni to revise budget after economic shock of coronavirus | Fin24

Mboweni is fond of quoting scripture, and now he does so again. 

The gospel according to the Apostle Matthew, chapter 7 verses 13 and 14 :

“Enter through the narrow gate. For wide is the gate and broad is the road that leads to destruction, and
many enter through it. But small is the gate and narrow the road that leads to life, and only a few find it.”

SA if faced with a choice between these two gates, he says 

Speaking of the loan guarantee
scheme, where the state guaranteed up to R200 billion in bank loans to businesses, Mboweni says that after a slow start it has been picking up steam.

“In its first month, the scheme lent over R10 billion. Many more applications are being
processed, and lending is expected to rise significantly.”   

Mbweni now gives overall figures 

*the national
share for 2020/21 increases from R758 billion to R790 billion,

*the provincial share decreases from R649 billion to
R645 billion; and

* the local government share increases from R133 billion to R140 billion.

“Local government is at the heart of our response to the pandemic. Accordingly, an additional R11 billion is allocated to local government through the equitable share. A further R9 billion will be reprioritised within allocated conditional grants to fund additional water and sanitation provision and the sanitisation of public transport,” he says. 

Mboweni says the state is putting aside R100 billion to create jobs. 

This will be a “multi-year, comprehensive response to our jobs emergency”.  

“The President’s job creation and protection initiative will be rolled out over the medium-term. It will include a
repurposed public employment programme and a Presidential Youth Employment Intervention.

“In this year, an
amount of R6.1bn is already allocated, and a further R19.6 billion has been set aside mainly for this purpose.”

The finance minister says that, to support vulnerable households an additional allocation of R25.5 billion to the Social
Development department is proposed, for a total relief package of R41 billion.

“All these measures will come to an end in October,” he adds. 

“The Supplementary Budget proposes R21.5 billion for COVID-19-related health care spending. It also proposes a
further allocation of R12.6 billion to services at the frontline of our response to the pandemic,” says Mboweni. 

“Allocations have
been informed by epidemiological modelling, a national health sector COVID-19 cost model and our experiences
over the past 100 days.” 

Mboweni says that the country needs to access new sources of funding.

“Government intends to borrow about US$7 billion from international finance institutions to support the pandemic
response,” he says without providing additional details. 

“This is compared to the deficit of R370.5 billion, or 6.8 per cent
2020 Supplementary Budget Speech
7
of GDP projected in February.

“This increase is mainly due to the revised revenue projections and pay-outs from the
Unemployment Insurance Fund. The narrower measure, known as the main budget deficit, is projected to be
14.6 per cent of GDP.”

Speaking about the revised fiscal framework, Mboweni says that total consolidated budget spending, including debt service costs, will exceed
R2 trillion for the first time ever.  

He says SA will also miss its tax target by R300 billion. 

“Gross tax revenue collected during the first two months of 2020/21 was R142 billion, compared to our initial
forecast for the same period of R177.3 billion.

“Put another way – we are already R35.3 billion behind on our
2020/21 target.  
As a consequence, grosstax revenue for the 2020/21 fiscal year isrevised down from R1.43 trillion to R1.12 trillion.
That means that we expect to miss our tax target for this year by over R300 billion.”  

Mboweni says SA has responded to the Covid-19 economic shock “with an unprecedented set of measures”.  

“Never before has government worked together so closely with the private sector, labour, community and the
central bank. Standing as a united people, it is clear we can achieve anything. Government’s COVID-19 economic
support package directs R500 billion straight at the problem.”

The minister continues to outline measures taken so far by the private and public sector to bolster the economy. 

The minister is now outlining the global economic impact of the coronavirus. 

“In the February Budget, we expected that the global
economy would expand by 3.3 per cent in 2020. We now expect a global contraction of 5.2 per cent this year.” 

“This
will bring about the broadest collapse in per capita incomes since 1870. Throughout the world, tens of millions of
workers have lost their jobs. South African unemployment increased by one percentage point, reaching 30.1 per
cent in the first three months of this year.”

“This indebtedness condemns us to ever-higher interest rates. If we reduce debt, we will reduce interest rates for
everyone and we will unleash investment and growth,” he says. 

“So today, with an eye on the future, we set out a strategy to build a bridge to recovery.  Our Herculean task is to close the mouth of the Hippopotamus!
It is eating our children’s inheritance.”

While SA has “many strenghs”, Mboweni says debt is SA’s biggest problem.

“We have accumulated far too much debt; this downturn will add more. This year, out of
every rand that we pay in tax, 21 cents goes to paying the interest on our past debts.”  

Mboweni says the supplementary budget

* brings an Adjustments Appropriation Bill and a Division of Revenue Amendment Bill to the House.

* formalises the two tax bills to give effect to the state’s response; and 

* asks Parliament to approve the response
package for Covid-19.  

Mbwoweni is also expected to announce the latest GDP projections and tax revenue shortfalls for 2020. 

Economists expect SA’s economy to contract by anywhere between 6% and 12% this year, a fall last seen during the Great Depression. 

In May, meanwhile, the commissioner of the SA Revenue Service, Edward Kieswetter, warned that the combined impact of SA’s struggling economy and the nationwide lockdown could mean a loss of up to R285 billion in tax revenues. 

“Of all the lieutenants of the Mbeki administration that met its end after the ANC elective conference on that cold and rainy weekend in the height of summer in Polokwane some 13 years ago, no-one carried the “aloof” tag as much as Tito Mboweni.”

Read Fin24 Editor’s Ron Derby’s take on the finance minister below. 

Much of Mboweni’s budget is expected to focus on how the government intends to ‘reprioritise’ R130 billion in spending. 

This R130 billion forms part of the R500 billion stimulus package announced by President Cyril Ramaphosa. 

Read Fin24’s overview of what to expect below. 

The minister’s address will start at 3pm and is expected to last an hour. Treasury has said the speech will be delivered “virtually”. 

After the speech, the minister will immediately head into a media briefing.  

Four months after he delivered his budget address to a Parliament, Finance Minister Tito Mboweni will on Wednesday afternoon deliver a supplementary budget address, brought about by the economic shock caused by the coronavirus pandemic.  

The main focus of the address will how the state will budget the R500 billion support package announced by President Cyril Ramaphosa to bolster the economy, 

Fin24 will be writing up the finance minister’s address in real time.