Government non-interest expenditure expected to increase

Finance Minister Enoch Godongwana says government non-interest expenditure is expected to increase in 2024/25. 

He was delivering the Medium-Term Budget Policy (MTBPS) statement speech in Parliament on Wednesday.

The increase is mainly attributed to:

• Rollovers from the previous financial year, to the value of R2.1 billion.
• R2.7 billion expenditure that was announced at the time of the main budget, mainly for the COVID-19 Social Relief of Distress Grant.
• Unforeseeable and unavoidable expenditure of R2.1 billion, mainly for disaster relief.
• A special appropriation bill that mostly covers the South African National Roads Agency SOC Ltd (SANRAL) obligations related to phase 1 of the Gauteng Freeway Improvement Programme (GFIP). A large part of this appropriation is made possible by the Gauteng Provincial Government honouring its R3.8 billion contribution to the debt this year.

“Our most immediate spending pressures will be addressed, despite the weaker revenue,” Godongwana said.

In the expanded MTBPS, National Treasury said the increases are partially offset by “declared unspent funds, projected underspending, contingency reserve drawdowns and provisional allocations not assigned to votes”.

“Relative to the 2024 Budget, debt-service costs are revised up by R6.7 billion,” said Treasury.

Looking further ahead, over the next two years, the main budget non-interest expenditure is expected to grow by a net of R32.4 billion, including the proposed increases:

• R11 billion to implement early retirement measures over 2025/26 and 2026/27 to manage the public service wage bill.
• R3.2 billion for the contribution from national government to the repayment of SANRAL GFIP debt in 2025/26.
• R10.1 billion for the provincial portion of SANRAL debt repayment relating to the GFIP and the maintenance backlog, which will be transferred to SANRAL. This amount will be paid to National Revenue Fund by Gauteng Province.
• R3.5 billion for carry-through costs for the deployment of South African National Defence Force (SANDF) troops in the Democratic Republic of the Congo.

“Compared with the 2024 Budget, the expenditure ceiling has increased by R16.8 billion per year in 2025/26 and 2026/27. Most of this increase is due to a repayment of SANRAL debt relating to the GFIP and early retirement costs,” Treasury said.

Relating to the public sector wage bill, government is expected to propose a reignition of its early retirement programme.

This, as National Treasury attempts to further reel in the wage bill.

“Over the past decade, the wage bill has decreased as a share of consolidated spending, falling from 35.7% in 2013/14 to 32.1% in 2023/24. By 2027/28, the wage bill is projected to decrease to 31.4% of consolidated spending.

“To further contain public service wage costs, government is proposing to reactivate early retirement without penalties. To support this initiative, an additional R11 billion will be allocated over the next two fiscal years. Details will be set out in the 2025 Budget,” the MTBPS said.

Furthermore, National Treasury said negotiations for the 2025/26 wage agreement have commenced and are “expected to conclude by the time of the 2025 Budget”.

“Government is committed to a fair and respectful collective bargaining and negotiation process in determining remuneration levels and conditions of service, while meeting its constitutional obligation to respect the budget process and deliver responsible and affordable fiscal policy,” National Treasury said. – SAnews.gov.za

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