National treasury recently briefed parliament on the Division of Revenue Amendment Bill.
The bill was tabled in parliament on 24 June 2020 as part of the Special Adjustment Budget.
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.
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.
A sovereign debt crisis will arise if spending plans remain unchanged.
Treasury emphasized that a major change in planned spending is required if debt is to be stabilized below 90% of GDP.
Changes to MTEF allocations will be announced in the Medium Term Budget Policy Statement in October 2020.
Treasury indicated that the plan is to re-assess spending areas in a “zero-based” budgeting approach.