The Medium-Term Budget Policy Statement (MTBPS) for 2023 was unveiled by Finance Minister Enoch Godongwana on 1 November 2023. The MTBPS, also referred to as the "mini-budget", allows government departments to apply for adjustments to their budgets, apply for rollovers, and request additional funds for unforeseeable and unavoidable expenditures. It sets government policy goals and priorities, forecasts the macroeconomic trajectory, and projects the fiscal framework over the next three years by outlining spending and revenue estimates.
The 2023 MTBPS came with the backdrop of poor global and local growth, falling revenues, and cost pressures for households, business, and government. As an alternative to raising taxes, the government was advised to focus on improving the efficiency of revenue collection through digitisation, modernisation of tax systems, and deploying artificial intelligence (AI).
The National Treasury has had to revise downwards the gross tax revenue of R1.8 trillion announced in the February Budget Review due to a slowdown in commodity prices and uneven global growth, which in turn impacted corporate income taxes. If the National Treasury also penciled in lower economic growth (expected at 0.9% at the beginning of 2023), this could have seen a deterioration of key fiscal indicators.
Here are the key highlights of the Medium-Term Budget Policy Statement (MTBPS) for 2023:
1. Budget Shortfall: Finance Minister Enoch Godongwana announced that the budget shortfall hits almost R57 billion.
2. Spending Cuts: There were significant spending cuts announced, but some economists believe they don't go far enough. The cumulative reduction in spending is around R154 billion over the three-year medium-term expenditure framework period.
3. Debt Crisis: A mounting debt crisis was cited as a cause for concern.
4. SRD Grant Extension: The Social Relief of Distress (SRD) grant was extended for another year, costing the government an additional R34 billion.
5. No Major Bailouts: No further major bailouts were announced for state-owned enterprises (SOEs) such as Eskom, Denel or SAA.
6. Public Sector Wage Increase: Additional funding of R24 billion for the 2023/2024 public sector wage increase was announced.
We look forward to the budget in February 2024 where the impact of these changes will be revealed as well as any further tax changes may be announced to fund the shortfall.