Picture: ELIJAR MUSHIANA
Picture: ELIJAR MUSHIANA

Finance minister Tito Mboweni will have to announce radical cost-cutting measures to rein in government expenditure as well as steps to stimulate the economy if SA is to contain the growth in the budget deficit and state debt, the DA said on Tuesday. 

The party unveiled its budget proposals at a media briefing on Tuesday.

The framework outlined by DA finance spokesperson Alf Lees and DA MP Gwen Ngwenya recognises that the budget will  include assistance to Eskom and other state-owned enterprises (SOEs) and that it would have to provide for lower-than- anticipated tax revenue.

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“Finance minister Tito Mboweni will be dealing with the biggest financial crisis since the advent of a democratic SA,” Lees said.

On top of the R27.4bn tax revenue shortfall announced in the medium-term budget policy statement in October, the DA expects an additional R8.4bn shortfall due to lower-than-anticipated corporate and personal income tax receipts. This would bring the total tax revenue shortfall to R35.7bn.

Lees does not expect any tax increases in the budget apart from not fully compensating for bracket creep on personal income taxes; higher-than-inflation increases on “sin taxes”; and a likely hefty increase in the Road Accident Fund (RAF) fuel levy to address its accumulated contingent liability of more than R300bn.

Ngwenya said the finance minister will have to produce a credible plan to boost economic growth to an average of at least 3%. This would require a “policy shock” of structural reforms designed to boost investor and consumer confidence.

Among the measures proposed by the DA are the removal of inhibiting visa regulations; scrapping the mining charter; reducing red tape; exempting small businesses employing fewer than 250 employees from complying with restrictive labour legislation; removing the extension of collective bargaining agreements to non-parties; and auctioning off high-demand spectrum with the proceeds being used to facilitate access to mobile internet and the roll-out of fixed fibre lines.

The DA proposes a 4.6% cap on increases on all current expenditure in 2019-2020, including public-sector wages. This would save an estimated R26.2bn and go a long way to begin to balance the books, Ngwenya said.

The cost-containment proposals made by the DA include reducing the size of the cabinet by about 20 ministries, saving about R670m in 2019-2020; restrictions on the purchase of new cars, upgrading of homes and the purchase of new furniture by ministers and deputy ministers; running the provincial legislatures more efficiently, which could save an estimated R1.9bn in 2019-2020; and reducing the number of foreign missions from 125 to 56.

The sale of non-core assets, such as Telkom shares (R14.9bn) and Gripen fighter jets (R14,5bn) could realise R29.4bn.

The DA expects the budget deficit for 2018/19 to be 4,5% compared to the forecast of 4,3% made in the medium term budget policy statement. This would be financed by higher borrowings which would increase national debt and debt service costs.

ensorl@businesslive.co.za