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Budget Speech 2017

South Africa's growth and transformation

Fiscal policy and the budget framework


Madam Speaker, the 2017 Budget reflects a balance between maintaining our spending commitments, and ensuring long-term health of the public finances. Slow economic growth has held us back and so decisive steps are needed to strengthen confidence, investment and growth.


Acting too quickly to reduce the deficit would harm service delivery, delay economic recovery, and compromise tax revenue collection. But to ignore our fiscal targets would result in interest rate hikes, unsustainable commitments and credit rating downgrades. This is a scenario in which short-term gains would quickly give way to financial stress, capital flight and cutbacks in service delivery.


To ensure a balanced and sustainable recovery, we indicated in the Medium Term Budget Policy Statement that we would raise an additional R28 billion in tax revenues. We also need to reduce spending by a total of R26 billion over the next two years.


The proposed expenditure for 2017/18 totals R1.56 trillion.
Interest on debt amounts to R169 billion.
Projected revenues amount to R1.41 trillion.
The balance of R149 billion, or 3.1 per cent of GDP, will be borrowed.


Government debt now stands at R2.2 trillion, or 50.7 per cent of GDP. Interest payments are a rising share of expenditure. By acting now to stabilise debt, we will ensure that future generations will not pay for today's expenses, 20 or 30 years from now.


Over the medium term, expenditure on public services will continue to grow moderately above inflation. Though the fiscal envelope is constrained, billions of rands have been shifted to meet new needs. A substantial additional allocation to higher education is again proposed, adding R5 billion to the R32 billion previously announced. After debt service and post-school education and training, the fastest-growing spending categories are health, social development, and community and economic infrastructure.


We will continue to safeguard expenditure that protects poor households. But the medium term expenditure limits are tight. Across all three spheres of government, and in state-owned companies and public entities, those responsible for deciding how money is spent have to do so with scrupulous rigour and care. It is only right that if households and firms face tough choices in balancing their income and expenses, the same disciplines must be applied in public expenditure.


Citizens  demand  accountability  to  ensure  public  funds  are  used  for  their  intended purposes. In Mahatma Gandhi’s phrase: “Democracy is not a state in which people act like sheep.”


South Africans are not like sheep, Honourable Speaker, and so I have received a great variety of “tips” from members of the public.


Ms Mmanyane Phori wrote: “I still wonder why we do not have TAX as a subject in school. Perhaps the government should educate people from a young age about tax, so that they will have an understanding that there is no government without taxpayers…” Quite right, Ms Phori!