Nomantu Nkomo-Ralehoko. Picture: SOWETAN
Nomantu Nkomo-Ralehoko. Picture: SOWETAN

The Gauteng economy is forecast to contract 6% in 2020 due to the Covid-19 lockdown, prompting the province to add R4bn more to its budget to help battle the effects of the pandemic, finance MEC Nomantu Nkomo-Ralehoko said on Thursday.  

Nkomo-Ralehoko was tabling a special adjustment budget in a sitting of the provincial legislature, which was necessitated by Covid-19, which has wreaked economic havoc not just in SA and Gauteng, the economic powerhouse of the country, but the world.

The expected contraction, while smaller than the 7.2% the national economy is projected to contract in 2020, is especially devastating as the province ordinarily contributes more than a third of SA’s GDP.

While SA had already entered a technical recession before Covid-19 brought the economy to a standstill, she said the current data indicates a clear recession that will deepen in the second quarter. 

“In the first quarter, the provincial economy contracted by 1.3% after a contraction of 1.4% in the fourth quarter of 2019. Current forecasts suggest that the Gauteng economy will contract by 6% in 2020,” she said.

She said this is why the province is taking urgent additional steps to mitigate the effect of Covid-19 on the Gauteng economy and to protect the poor and the vulnerable.

Nkomo-Ralehoko said the budget has been increased from the initial R142.4bn for the 2020/2021 financial year to R146.4bn.

“This is a R4bn upward adjustment of the budget mainly because we have allocated additional resources to the provincial response to the Covid-19 pandemic,” she said. “The rapid spread of the virus has severely constrained public resources.”

The budget not only comprehensively responds to Covid-19, but also macro-, micro- and social policy issues. 

Nkomo-Ralehoko said that despite extensive reprioritisation of the existing baseline, focus has remained on the 10-year plan for the provincial government, “and the resources allocated to the actualisation of those comprehensive measures [are] crucial to economic mitigation, job preservation and socio-economic recovery in this period”. 

Reprioritising budgets

Given the constrained fiscal environment, which is further compounded by “very little resources” that have been transferred from the Treasury to assist the funding of Covid-19 measures, departments have to reprioritise funds internally.

She said in total, provincial departments collectively reprioritised R7.9bn within the existing baselines to accommodate coronavirus-related expenditure. Some of the reprioritisations include the department of health shifting R2.1bn to implement HR capacity requirements and R786m for Covid-19 infrastructure projects.  

The department of education reprioritised R5.2bn to comply with the national pre-conditions for the reopening of schools and to support catch-up activities.

“Areas to be funded include the appointment of additional personnel to assist with screening, social-distancing, hygiene, sanitisation and personal protective equipment (PPE),” Nkomo-Ralehoko said.

The department of social development reprioritised R257.6m to procure PPE, upscale the food distribution programme, and to provide shelters for the homeless during the national lockdown.

Gauteng premier David Makhura said earlier this year that, in a worst-case scenario, about 2-million jobs could be lost in the province. While updated projections have not been supplied, Nomfundo Tshabalala, the head of Gauteng’s finance department, said the job losses have necessitated that the province work closely with different sectors. 

She said the manufacturing and construction sectors bore the brunt of the economic impact. While Stats SA will release data showing the actual impact on different sectors, the province had seen “a little” improvement in agriculture and mining. 

Update: July 23 2020
This article has been updated with new information and figures.

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