Mungo Soggot
In what would be a first in modern times, South Africa is within reach of a budget surplus.
Tax collections have far exceeded expectations during the first few months of the fiscal year. At the same time, government expenditure is not keeping up the pace amid ongoing concerns that several departments lack the capacity and the know-how to spend what they have.
A budget surplus would be an extraordinary demonstration of the African National Congress government’s commitment to fiscal rectitude. But it would also be embarrassing for a government criticised for not spending the money available in key “delivery” portfolios.
During the first three months of the fiscal year, which begins in April, revenue was up 21,2% a massive increase on the 7,9% that the National Treasury budgeted for. In June revenue was up 32% on the same time last year leading to a surplus of R3,7-billion. Economists say other data suggest the July figures, which are out at the end of the month, could be even better. Expenditure was up 6,6% in June, compared with the budgeted increase for the year of 9,4%.
Economists say such large revenue overruns during this stretch of the fiscal year are not seasonal and that if the same trends continue, a surplus is on the cards.
Johan Els, an economist at Old Mutual, says it is unusual to get such large overruns during this phase of the fiscal year and that large overruns normally take place in the second half. “If we continue at this rate, yes, a surplus is possible,” Els says. He adds that the budget performance so far suggests South Africans can expect further tax cuts next year.
Michiel Bester of Econometrix says he thinks the government will seek to avoid a surplus because of what it would signal about the state’s inability to spend. “If it creeps up on them, they [the government] will do anything to avoid it,” Bester says. He also believes it is unlikely considering the recent shift in emphasis in government thinking namely that there can now be less emphasis on “going all out for the foreign investment lobby”, and more on stimulating the local economy.
Another economist says the revenue bonanza makes the government less dependent on the R18-billion it has budgeted for proceeds from privatisation a figure which now looks unrealisable because of the delay in the initial public offering of Telkom. This was supposed to account for the lion’s share of the R18-billion.
The government has steadily chiselled away at the budget deficit over the past few years, notching up a deficit of 1,9% of gross domestic product in 2000/2001, compared with 2,4% the previous fiscal year.
Underspending has been a recurring theme of the government’s finances in recent years. It emerged in May last year that R1,4-billion of the land reform budget had not been spent since 1995 with only 4923 of the 87200 restitution applications having been passed.
Other examples, according to the auditor general, include the Department of Social Development, which surrendered R197,7-million of its budget between 1994/95 and 1997/98 because it had been unspent.