Enoch Godongwana’s 2022 Medium Term Budget speech
On Wednesday (26 October), Finance Minister Enoch Godongwana delivered his second Medium-Term Budget Policy Statement (MTBPS), which painted a promising story.
Three key aspects emerged from the MTBPS. These were the large tax overrun expected for 2022/23; government’s focus on reallocating funds towards infrastructure spending, to lift the country out of a low-growth trajectory; and the allocation of funds to struggling state-owned enterprises.
Minister Enoch Gondogwana stated that the country expected to record a higher revenue collection, mostly through corporate income tax, which government says will assist to restore some of its department’s budgets and aid in the provision of basic services to citizens.
Key figures from this year’s mid-term budget speech:
It is clear from the vast array of data provided by National Treasury that the current set of fiscal and economic reforms is only expected to begin yielding meaningful results over the next few years. This is reflected in the fact that National Treasury is projecting GDP growth to average around only 1.7% a year over the next four years, while government debt is projected to peak at 71.4% of GDP in 2022/23 before moderating to 70% of GDP by 2025/26.
National treasury says it’s making progress in its bid to stabilise South Africa’s debt burden, announcing that a fiscal deficit of 4.9% of the GDP is projected for 2022/23.
Source: National Treasury, Anchor
It’s also projecting that consolidated government spending will exceed R2.2 trillion this year and likely to rise to R2.5 trillion in the year 2025/26.
Revenue collections have also exceeded projections, with the tax revenue to be around R83.5bn higher in FY22/FY23 than forecast in the February 2022 Budget, with total revenues penciled in at R106bn higher (higher than even the most optimistic of forecasts).
The revenue is accredited to improvements in the corporate income tax collections, with strong receipts from the finance and manufacturing sectors. This has allowed government to restore the baseline budgets of departments that are key to the delivery of services, without forcing it to make commitments it cannot afford.
Overall, the 2022 MTBPS was encouraging. SA’s fiscal position remains relatively sound, having avoided a fiscal cliff in 2021, largely thanks to the recent surge in global commodity prices and subsequent increased export revenue earnings.
Source: National Treasury, Anchor, Stanlib