Page 22 - Waterfall Issue 4 2021

Waterfall News

buDGET 2021

Quick View by PwC

By Jeaunes Viljoen, Senior Manager, PwC Strategy&
T he Minister of Finance, growing component of expenditure.

Tito Mboweni, delivered
his Budget Speech 2021 to
expenditure in the current fiscal year,
Parliament in late February. After budgeting R1.9 billion in vaccine
Below is our quick view on some of a total of R9 billion has been set aside
the most crucial aspects discussed. over the medium term for the COVID-19
vaccine rollout. PwC believes that some
EcoNoMIc GRoWTh of this funding will come from the general
FoREcASTS uNDERPINNED government revenue pool while private
by A SuccESSFuL VAccINE medical schemes are also expected
RoLLouT to make contributions – likely paying
National Treasury expects the more for their members’ jabs in order
economy to grow by 3.3% this year, to subsidise uninsured individuals.
and for economic activity to return
to pre-pandemic levels by the latter Budget 2021 again pledged to implement
part of 2023. This is in line with PwC’s zero-based budgeting. This process
growth estimate of 3.5% for 2021. involves building departmental budgets
from scratch instead of just taking the
Officials are clearly pinning their hopes company taxes. The corporate tax rate previous year’s numbers and adjusting
on a successful rollout of the COVID-19 is being reduced by one percentage these for inflation and other needs.
vaccine: “A successful vaccine rollout point to 27% from next year, with zero-based budgeting requires the
is likely to boost domestic economic further deductions in the corporate justification of all expenditure by doing
growth, enabling renewed trade and tax rate possible in the future. a full review of spending plans – and
releasing pent-up demand. Conversely, not just keeping programmes on the go
a slow, stuttering rollout poses the Of course, this favourable situation because they were important in the past.
most significant threat to economic did not change plans for the annual
recovery,” stated the Budget Review increase in excise duties on tobacco and GooD NEWS: A SMALLER-
2021. The National Treasury’s downside alcohol products. The finance minister ThAN-EXPEcTED FIScAL
scenario warns of another economic commented that excessive alcohol DEFIcIT
recession should a third and fourth consumption can lead to negative The projected budget balance for this
wave of COVID-19 infections hit the social and health outcomes and that year and the rest of the medium term
country, with the vaccine rollout consumers do react to price increases, is better than economists expected.
only gaining traction in 2022. i.e. higher prices should lead to lower The current financial year is expected to
consumption of alcohol products. see a revenue shortfall of 14% of GDP
REVENuE coLLEcTIoNS compared to the estimate of 15.7% of
WILL bE bETTER ThAN EXPENDITuRE: zERo-bASED GDP released in October. For the coming
PREVIouSLy FoREcAST buDGETING STARTING IN financial year, the projected shortfall
Revenue collections were above 2022/2023 of 9.3% of GDP is also smaller than
expectations during the fourth Despite a planned sharp reduction over economists expected, based on a figure of
quarter of 2020, with a particularly the medium term in the size of the fiscal 10.1% of GDP from the Bloomberg survey.
strong performance in corporate budget, Minister Mboweni does not
tax receipts on the back of larger see his budget as one of austerity, but Budget Review 2021 makes it clear
payments from the mining industry. as growth-stimulating and supportive that fiscal consolidation is a priority
of the Economic Reconstruction and that the state will use the better-
Minister Mboweni was able to make and Recovery Plan on the basis that than-expected revenue situation to
good on an earlier pledge to lower investment spending will be the fastest reduce the size of the fiscal deficit.

20 Waterfall Issue 4 2021