Given the difficult economic conditions facing the country, coupled with the many competing interests for funding, SEIFSA commends the National Treasury (NT) for maintaining a prudent fiscal management approach in the Medium-Term Budget Policy Statement (MTBPS).
The NT has not let the exuberance of higher gross tax revenues, now estimated to be R92.6 billion higher over the next three years, relative to the February 2022 estimates, distract it from the fiscal consolidation path. The result is an improvement in the fiscal metrics much earlier than anticipated, namely a primary budget surplus of 0.7% of GDP as early as 2023/24, with expectations of a widening in this metric in the outer years. Gross debt to GDP is also expected to be maintained around the 70% over the medium-term expenditure framework and trend downward to 63% by 2030.
SEIFSA also welcomes the growing emphasis placed on spending on building new and rehabilitating existing infrastructure which will increase from R66.7 billion in 2022/23 to R112.5 billion in 2025/26, making spending on capital assets the fastest-growing item by economic classification. Although even much greater infrastructure investment is still necessary to put the country’s economy and the steel and engineering sector on a sustainable path, the growing emphasis on economic investment is welcomed. In fact, SEIFSA’s view is that this was a recurring theme throughout this budget.
SEIFSA has been involved in the NEDLAC consultation on the public procurement bill and welcomes the announcement of a firm commitment that the bill will be introduced to Parliament in March 2023.
Regarding the announcement that the preferential procurement regulations will be released on the 16th of January 2023, SEIFSA has noted with grave concern that National Treasury has maintained the stance that state organs will have the authority to determine their own preferential procurement policies. During public consultation on these regulations, SEIFSA stressed that this approach will create an untenable administrative compliance environment for domestic companies. It will also make institutional coordination, alignment across the multiple state organs, and the monitoring and enforcement of regulations impossible.
A key message from this budget is that global economic headwinds are intensifying with global growth being downgraded from 4.4% to 3.2% in 2022, and 3.8% to 2.7% in 2023, presenting a less supportive economic environment for South Africa’s prospects and growth. SEIFSA continues to stress that in difficult times like these, domestic economic and fiscal policy must do much heavier lifting to counter the global trends. Well-considered industrialisation plans that create a conducive business friendly environment for domestic companies to operate is absolutely paramount. Creating this environment is squarely in the hands of the government and SEIFSA continues to call for greater focus in this direction.