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National Treasury Outlines Three-Pronged Strategy

July 24, 2020

National Treasury

National Treasury has set itself a three-pronged strategy.

The finance minister, Tito Mboweni, outlined the three-pronged strategy during treasury’s Budget Vote 2020/21 in parliament.

According to the minister, the first prong is to achieve sustainable public finances.

“The National Treasury is on a mission to restore fiscal strength. This a minimum condition required to prepare South Africa for the next pandemic or economic shock. More importantly, it is a necessary condition to improve the quality of life of all citizens and free the potential of each person.”

The second prong is to strengthen the sound financial controls and management of public finances across the public sector.

The minister pointed out that “effective intergovernmental relations are critical in ensuring that all arms of government work closely together to deliver on improved living standards for all”.

The third prong is to advocate for sound economic policy in line with president Ramaphosa’s direction.

“We intend to strengthen our macroeconomic policy framework, facilitate regional and international cooperation, and continue the roll-out of our improvements to the system of financial regulation.”

Treasury will also drive a package of reforms to improve productivity, lower costs and reduce demands of state-owned companies on the public purse.

“These measures include finalising electricity determinations, unbundling Eskom and taking other steps to open up energy markets, modernising ports and rail infrastructure, and licensing spectrum.”

In his speech, the deputy minister of finance, David Masondo, indicated that additional reforms, in line with the Economic Transformation, Inclusive Growth, and Competitiveness: Towards an Economic Strategy for South Africa include lowering the cost of doing business; support for agriculture, tourism and other sectors with high job creation potential; facilitating regional trade; reducing the skills deficit by attracting skilled immigrants and revamping the skills framework.

The deputy minister also declared that treasury will “maintain confidence in our monetary policy through ensuring the independence and accountability of the South African Reserve Bank”.

Meanwhile, the Division of Revenue Amendment Bill has been passed by parliament and sent to president Ramaphosa for assent.

The bill was tabled in parliament on 24 June 2020 as part of the Special Adjustment Budget.

The national assembly passed the bill and sent it to the national council of provinces for concurrence last week.

The Division of Revenue Amendment Bill aims to:

• amend the Division of Revenue Act, 2020, in accordance with the Money Bills and Related Matters Act, 2009; and
• provide for matters connected therewith.

National treasury recently briefed parliament on the bill.

In its briefing to the standing and select committees on appropriations, treasury pointed out that the bill focuses on additions to the new COVID-19 component of the HIV, TB, Malaria and Community Outreach Grant, additions of R11 billion to the local government equitable share and downward adjustments to some conditional grants in order to fund other COVID-response activities.

Treasury also confirmed that the increased government spending to respond to COVID-19 is funded in part by increasing the deficit and in part by reprioritising resources.

R130 billion is to be reprioritised with R30 billion coming from provinces (excluding conditional grants) and R100.9 billion in reprioritisations.

Reprioritised funds are sourced from savings on activities (travel, venue hire, catering) that are no longer possible, unspent funds due to lockdown regulations such as most infrastructure grants that could not be spent under level 4 and level 5 regulations and identifying possible under-spending.

Treasury informed the committees that each province and municipality will have to adjust their own budgets to respond to the challenges posed by COVID-19.

Treasury indicated that the bill only makes changes to 2020/21 allocations.

In its report, the standing committee on appropriations calls on national treasury to provide a comprehensive report on how it plans to fund infrastructure spending aimed at reconstruction, rehabilitating and maintaining social and economic infrastructure such as schools, roads and other government infrastructure assets post Covid-19.

The committee also wants treasury to provide a comprehensive report prior to the tabling of the medium term budget policy statement in October on how the bill responds to the pronouncements made by the president on infrastructure investments for both economic growth stimulation and job creation.

The select committee on appropriations, in its report, called on government to improve and strengthen its financial management systems and internal controls units; appoint proper audit committees; and design and develop focused, properly aligned monitoring and evaluation systems with credible strategic plans across government to ensure that allocated resources are spent effectively and strictly according to the framework of the bill in order to prevent wasteful and fruitless expenditure, irregularities and corruption with COVID-19 relief funds.