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Budget Speech 2021

2. The Fiscal Framework


Under the leadership of our President, we have crafted a Fiscal Framework that extends support to the economy and public health services in the short‐term, while ensuring the sustainability of our public finances in the medium term. This is our first reason for hope.


The fiscal framework we table today entails the following:


Main budget revenue is projected to be R1.35 trillion, or 25.3 per cent as a share of Gross Domestic Product (GDP) in 2021/22. This rises to R1.52 trillion in the outer year (2023/24) of the Medium‐Term Expenditure Framework (MTEF).


At the same time, non‐interest spending will remain steady at approximately R1.56 trillion over the next three years but will decline as a share of GDP from 29.2 per cent in 2021/22 to 26.2 per cent of GDP in 2023/24.


I requested tips from the public to help craft this Budget. Many tips spoke about the limits to increased taxation. We agree that tax increases must be kept to a minimum as we stabilise our public finances. We have chosen not to introduce the R40 billion in tax measures initially proposed in the October Medium Term Budget Policy Statement (MTBPS).


With this framework we provide the budget for South Africa's vaccination campaign. This campaign allows us to emerge from the restrictions to economic activity. We are allocating more than R10 billion for the purchase and delivery of vaccines over the next two years.


We increase the contingency reserve from R5 billion to R12 billion to make provision for the further purchase of vaccines and to cater for other emergencies.


With this framework we are on track to achieve our goal of closing the main budget primary deficit. We shall achieve a primary surplus on the main budget in 2024/25. This important achievement will coincide with the end of this sixth Parliament.


Most importantly, we will stabilise government debt at 88.9 per cent of GDP in 2025/26 and the ratio will decline thereafter. This is a significant improvement to the framework we presented in October last year and creates a sound platform for sustainable growth.


Total consolidated spending amounts to R2 trillion each year over the medium term, the majority of which goes towards social services.


Honourable members, getting our fiscal house in order is the biggest contribution we can make to support our Economic Reconstruction and Recovery Plan. Continuing on the path of fiscal consolidation during the economic fallout was a difficult decision. However, on this, we are resolute. We remain adamant that fiscal prudence is the best way forward. We cannot allow our economy to have feet of clay.


High government debt levels increase the cost of borrowing across the economy. The rising debt leads to higher future taxation and uncertainty.


Servicing this rising debt takes away resources that could have been invested in infrastructure and frays our social solidarity.