Ms Debra Makwirimati, Acting Director of Fiscal Research at the National Treasury
The Vaal University of Technology (VUT) was selected as one of the tertiary institutions which National Treasury officials would address on the Budget 2018 as part of its outreach programmes.
On 8 March, VUT hosted keynote speaker Ms Debra Makwirimati, Acting Director of Fiscal Research at the National Treasury at the Desmond Tutu Hall.
Ms Makwirimati came to unpack former Finance Minister Malusi Gigaba’s Budget Speech which he delivered on 21 February. The aim was to stimulate debate around the budget by students, academics and the general public and for the officials to respond to questions the students and the guests had.
In her presentation titled: ‘Restoring economic confidence and stabilising the public finances’, Ms Makwirimati’s main message was that the 2018 Budget outlines a series of measures to rebuild economic confidence and return public finances onto a sustainable path. This followed the announcement that was made in October that the Repo Rate was above 6% and measures had to be taken to bring it back to a sustainable trajectory.
She explained that that public finances are considered sustainable when the gross domestic product (GDP) has risen and masters the declining stage.
She outlined that the Budget 2018 responds to revenue shortfalls presented in the 2017 Medium Term Budget Policy Statement (MTBPS) and the announcement of free higher education and training. It also accelerates government’s efforts to narrow the budget deficit and stabilise debt. New tax measures should raise an additional R36 billion in 2018/19, mainly through a higher VAT rate and below-inflation adjustments to personal income tax brackets.
“Fiscal measures had to be proposed looking at the revenue and expenditure side of the country, these included adjusting the tax brackets below inflation rate, major reductions on spending amounting to R85 billion, an allocation of R57 billion for fee-free higher education, additions to the contingency reserve of R10 billion and setting aside more funds for unavoidable expenditure over a period of three years,” she said.
She added that together with an improved growth output in 2018, the revenue and spending measures reduce the consolidated deficit from 4.3 per cent of GDP in the current year, to 3.5 per cent by 2020/21. The main budget primary deficit will close, helping to stabilise debt at 56.2 per cent of GDP in 2022/23.
While looking at raising revenue and reducing the debt amount, the government is aware that there are risks to the public finances which include an uncertain growth outlook, wage pressures and the weak finances of state-owned companies. These may result in the revenue target not being met, but there are ongoing conversations regarding the matter concerning state-owned companies like Eskom and others, she assured the attendees.
The attendees were also given clarity on: the VAT issue (why it had to increase), the projections of fee-free higher education budget allocation on a national and provincial level over a period of four years (2018-2021), the entrepreneurial support budget from the government, and the agricultural sector which, as a main contributor to economic growth will need to be protected from being negatively affected by the land expropriation issue.
She concluded her address by mentioning that there was going to be a decline in investment if action was not taken to raise revenue, therefore the government had to develop reforms to take the economic growth of below 2% to 5%. Ms Makwirimati said the government knows what needs to be done to boost the economy.
The platform was then given to attendees to pose their comments and questions.