Honourable Speaker Mr President

Mr Deputy President Cabinet Colleagues

Governor of the South African Reserve Bank Members of the Executive Committees for Finance Honourable Members

I hereby table: 

• The Division of Revenue Second Amendment Bill
• The Second Adjustments Appropriation Bill
• The 2020 Rates and Monetary Amounts and Amendment of Revenue Laws Bill
• The 2020 Taxation Laws Amendment Bill
• The 2020 Tax Administration Laws Amendment Bill
• The 2020 Second Adjusted Estimates of National Expenditure
• The 2020 Medium Term Budget Policy Statement

Introduction

Honourable members

Twenty-six years ago, President Nelson Mandela stood at this very spot to weave the tapestry of our newly democratic country.

Freedom was only two weeks old. Madiba challenged us to:

Meet despair with hope and death with a reaffirmation of the beauty of life.

His plan for the country’s first democratic administration committed us to fiscal rehabilitation after the devastation wrought to our public finances by the previous regime.

Most of us sitting in this House, I amongst them, did not know it then but Madiba was ushering in a period of unmatched social progress in our history.

Over the next 15 years, the economy began to re-emerge. Real GDP rose by 61 per cent and 5.3 million jobs were created.

We are fiscally at a moment not unlike that in 1994. We must rebuild our economy, rehabilitate our public finances and recover from the devastation wrought upon us by COVID-19.

As we rose to that fiscal challenge, so we will rise to this one.

Two weeks ago, President Matamela Cyril Ramaphosa laid out the government’s consensus-driven and action-oriented Economic Reconstruction and Recovery plan. This particular plan is urgent and all of us should do everything in our power to implement it.

Summary of the medium-term fiscal strategy

Honourable members,

The June 2020 Special Adjustments Budget was prepared in an environment of extreme uncertainty. Given the economic situation then, government proposed a three-year fiscal consolidation.

Since June, more data has become available. The economy is now expected to contract by 7.8 per cent this year, and the 2021 outlook is more uncertain. Job losses have been particularly severe.

But we cannot allow our recent fiscal weakness and the pandemic to turn into a sovereign debt crisis.

Therefore, today government sets out active measures to avoid this risk.

We table a five-year fiscal consolidation pathway that promotes economic growth while bringing debt under control.

The fiscal measures realign the composition of our spending from consumption towards investment and support efforts to lower the cost of capital.

Our revised fiscal framework puts us on a course to stabilise the ratio of debt- to-GDP at around 95 per cent within the next five years. The stock of gross debt will rise from roughly R4 trillion this year to R5.5 trillion in 2023/24.

The medium-term fiscal strategy narrows the main budget primary deficit from an expected R266 billion in 2021/22 to R84 billion in 2023/24 and we achieve a surplus by 2025/26.

We propose consolidated spending of R6.2 trillion over the 2021 Medium Term Expenditure Framework, of which R1.2 trillion goes to learning and culture, R978 billion to social development and R724 billion to health.

We  forecast the South African economy to grow by 3.3  per cent in 2021,1.7 per cent in 2022 and 1.5 per cent in 2023.

Mr President, by putting all our efforts into implementing the Economic Reconstruction and Recovery Plan, we can accelerate growth to 3 per cent or more. This will secure fiscal sustainability and build this economy better than before.

The economic context

Turning now to the economic context.

A sharp - and hopefully short - global recession is underway. The International Monetary Fund expects global output to contract by 4.4 per cent in 2020, before rebounding to 5.2 per cent in 2021 in their October World Economic Outlook.

Growth in advanced economies is strengthening. Next year, emerging market countries are set to grow by 6 per cent.

Sub-Saharan Africa is expected to rebound to growth of 3.1 per cent in 2021. As always, Africa has been at the forefront of innovative solutions to the crisis, including delivering social assistance using digital technology.

Madam Speaker, you are now well aware that the country’s Aloe Ferox is drought resistant, it can survive the harshest of circumstances and can certainly withstand a pandemic.

Our little Aloe Ferox has survived! It is recovering!

In South Africa, the high frequency data that we collect suggests that green shoots are emerging. At this stage, it looks like there will be a strong rebound in the next quarter.

These will be supported by government’s Economic Reconstruction and Recovery plan.

Already there is progress on implementing the plan.

Click here for the full speech