For once, the economy is behaving itself, and growth is picking up. Finance Minister Nhlanhla Nene told MPs on Tuesday: “For the first time in a very long time, it appears that economic growth will be higher than projected at the time of the Budget Review.”
He said this is due to improved business and consumer confidence and a favourable global economic backdrop.
“This favourable momentum is an opportunity for us to build upon. But we should not be lulled into a false sense of security,” he said.
“We must continue to rebuild our resilience to ensure that we can respond to exogenous shocks that may arise from geopolitical events, or volatile financial markets. We need to rebuild trust in our public institutions and the integrity that they should stand for. And we need to deliver on economic reforms, jobs and investment that South African households and businesses have entrusted us to deliver.
”We are charting a course for a sustainable path of spending and borrowing. We are working hard to support better service delivery in provinces and municipalities.
”We are contributing to restore and “re-capture” our state-owned entities and supporting the drive against state capture. We are also driving transformation and growth through procurement reforms, the CEO initiative, and the financial sector charter reforms.”
Nene told Parliament that the budget deficit for 2017/18 is expected to be “marginally narrower than what was projected when we tabled the Budget in February.
“Lower-than-expected spending outcomes mean that the expenditure ceiling has not been breached, despite R16.2 billion of additions to non-interest spending in 2017/18.
“Government remains committed to the central adjustments to the fiscal framework announced in February this year.
“The outlook for tax revenue collection remains unchanged for now. The revenue measures, including the increase in VAT from 14% to 15%, introduced in February have now taken effect.
“Any tax revenue collection agency must, like Caesar’s wife, be above suspicion. The next major step therefore towards strengthening public finances is to restore public confidence in SARS.
“In this regard, President Ramaphosa is finalising the appointment of the Commission of Inquiry into SARS.”
On VAT, Nene said that an independent panel of experts has been appointed to review the list of 19 zero-rated food products, and consider how best for government to mitigate the impact of the VAT increase on poor and indigent households.
“I have also requested the Panel to consider whether key poverty-alleviating expenditure programmes like the School Nutrition Programme might be better at supporting the vulnerable,” he said.
“The Panel is expected to submit an initial set of proposals to me by the end of June this year. We will continue to engage all relevant stakeholders to ensure that the VAT increase will not have an adverse impact on poor and indigent households.”