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Gordhan issues Medium Term Budget Policy Statement

The Minister of Finance, Pravin Gordhan, published the national Medium Term Budget Policy Statement on 25 October 2012, for the 2013 budget. The Policy Statement serves four purposes: it outlines the economic context against which the 2013 budget is being formulated; it explains the national fiscal policy; it presents the division of nationally collected revenue between national, provincial and local government; and it proposes government’s spending framework for the next three years.

The Policy Statement sets out the government’s policy and financial commitments against a backdrop of economic uncertainty. A strong message emerging from the Policy Statement is that the next three years will not be marked by increases to the 2012 budget, but rather by a focus on the more efficient and effective use of resources. Key commitments in this regard are to implement reforms in provincial and municipal infrastructure planning and delivery, and to combat waste, inefficiency and corruption.

The medium-term expenditure framework (MTEF) reflects the following: social and economic development priorities such as education, health, social development, infrastructure, crime-fighting and enhancing competitiveness; the reprioritisation by departments of their spending away from ineffective programmes towards programmes more closely aligned with the National Development Plan; and reforms of infrastructure planning and delivery in provinces and municipalities.

Provincial and local government allocations

Over the next three years, an additional R38.1 billion will be added to transfers to provincial spending to enable provinces to extend and improve school facilities, expand library services, improve health services and increase social welfare services.

The following provincial conditional grants will be increased: the comprehensive HIV and AIDS grant will receive additional funding to compensate for reduced donor funding of HIV and AIDS prevention, care and treatment programmes; the human settlements grant for upgrading informal settlements; the community library services grant; reprioritised funds will be used to improve the delivery of school infrastructure through the education infrastructure grant.

The formula for the allocation of funds to municipalities will be changed so as to provide a subsidy for the provision of free basic water, electricity, sanitation and refuse removal services for every poor household. It will also explicitly allocate (for the first time) funds for non-trading services such as municipal roads and fire services and funds for the maintenance of basic services.

Health spending

Health spending has moderated in 2012/13 and the Policy Statement enjoins the health sector t employ greater efficiency and financial management within the current constrained fiscal environment. Priorities in the 2012/13 MTEF period include the rollout of an improved TB diagnostic test as well as support for HIV and AIDS programmes in the face of the withdrawal of US-funded assistance.

Social development spending

R450-million will be saved through the new social grants administration system, a saving which will be used to improve SASSA infrastructure and systems and to employ additional social workers. The 2013 Budget will fund the recruitment of graduates from the social worker scholarship programme. In addition, funds will be allocated for improved funding to NGOs in social development.

Education spending

The priorities in education are to improve the quality of education, develop the education workforce, and promote inclusive citizenship.It is the largest expenditure category, rising to R 269 billion in 2015/16. Slow spending on the schools infrastructure backlogs grant has resulted in R 7.2 billion being taken away from this programme and redirected towards the education infrastructure grant, the community library grant, and the construction of two new universities. The priorities in basic education are the expansion of Grade R and the improvement of numeracy and literacy in the foundation phase, as well as reducing school infrastructure backlogs. In addition, a new national sports plan will be rolled out in the MTEF. Higher education’s priorities are to improve success rates at university level and improve FET college programmes.

Employment and labour spending

Supplementary funding will be made available to maintain factories that employ disabled workers. R4 billion rand will be allocated to expanded public works programmes. The community work programme will receive about R 7.6 billion over the next three years and environmental programmes about R 8.5 billion. Additional funds will also be made available to NGOs that participate in the non-state sector employment programme.

Police, public order and safety spending

Expenditure on defence, public order and safety will grow from R141.7 billion in 2012/13 to R169.8 billion in 2015/16. Funds have been reprioritized to the Department of Justice and Constitutional Development to improve the efficiency of the criminal justice system and to maintain Thuthuzela Centres, which assist victims of rape.

It is of some concern that, given the National Development Plan’s emphasis on ECD as a critical developmental intervention, the Policy Statement does not expressly allocate additional funds to and prioritise ECD outside of the school (Grade R setting), universalisation of ECD, ECD services and/or ECD infrastructure. Given the pending ECD National Plan of Action and ECD improvement plan which is being developed by the Department of Social Development pursuant to the national ECD diagnostic review, it is hoped that once these have been approved by Cabinet, ECD will feature prominently in the next MTEF.

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Click here to view the Medium Term Budget Policy Statement.