South Africa’s R109-billion spending crisis

A leaked copy of an ANC economic transformation committee document shows the major economic pressure faced by the state — with government still struggling to find R109 billion to spend on critical expenses, existing commitments, and budgeted costs.

The Sunday Times reports that the presentation was led by finance minister Enoch Godongwana and was used to show why government cannot justify a basic income grant.

Critical expenses that are yet to be paid and form part of the R109-billion figure include:

  • R15 billion towards student debt
  • R16.1 billion for provincial accruals and payables
  • R5 billion to rescue the Land Bank
  • R4.56 to SANRAL
  • R3.21 billion to Denel
  • R19.6 billion to cover public sector wage increases

The impending launch of a state bank requires another R10 billion to get off the ground, while R38.85 billion is required for costs that have been budgeted for, but not yet paid.

It is estimated by National Treasury that a basic income grant that paid out R595 per month would cost South Africa another R189 billion per year.

Such a scheme is currently unrealistic given government is struggling to meet its existing R109 billion commitment.

News of this presentation followed the Department of Social Development withdrawing its paper that focused on funding a universal basic income grant through significantly higher income taxes.

“Since its publication, there has been widespread commentary on the key recommendations entailed in the Green Paper,” said the department.

“Some of the technical proposals were not well understood, and many have misrepresented the proposals, particularly the Social Security Fund.”

The paper said that a 10-percentage point increase on income taxes would be required to raise the roughly R200 billion per year required to provide a universal income at the food poverty line.

The paper also proposed a state-run pension scheme that would require a mandatory contribution of between 8% and 12% of worker salaries — up to a maximum of R2,760 per month.

Deputy finance minister David Masondo responded by saying South Africa cannot afford the proposals contained within the paper.

“We have to ask ourselves what are the preconditions for a social security grant proposed in these reforms,” said Masondo.

“As a country, we should sequence our current economic priorities, and we should not confuse our aspirations with what is possible economically.”

The Department of Social Development welcomed the public scrutiny of its paper, and said it plans on releasing a new paper once it has addressed areas that require clarification.

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South Africa’s R109-billion spending crisis