On 24 July 2020, Finance Minister Tito Mboweni delivered an adjustment budget following the havoc created by the impact of Covid-19 on people’s health and the country’s economy.

Despite the initial impression of a sizeable stimulus package of R500 billion announced by President Cyril Ramaphosa in April, the adjustment budget foresees an increase in expenditure of only R36 billion compared to what had been announced in the February 2020 speech.

The deficit, however, expands dramatically because of the impact of the pandemic on government revenues. This is partly as a result of R70 billion in tax relief, but is mostly the result of dramatic declines in corporate and individual income taxes as well as declines in VAT receipts and excise taxes.

In total, the government expects revenue to fall by R304 billion compared to the figures announced in the budget in February.

CDE VIEWPOINTS by Professor Philippe Burger, University of the Free State