Government spending increases for 2016 financial year

Government spending has increased by from R1.3 trillion in 2015/16 to R1.4 trillion in this financial year.

According to the medium-term budget policy statement released today this exceeds the amount government has managed to collect, which in the current year is R1.3 trillion.

The state is also in the red with a debt of R2 trillion.

The quality of spending has to be ensured.

Too much public spending was regarded as wasteful, too much had been ineffectively targeted for and too little was translated into value for money.

Further deterioration of the economy could lead South Africa into a low-growth trap, and taking no action could result in ratings downgrades, capital flight, a rapid drop in the exchange rate and a spike in interest rates.

To avoid this trap, government’s proposals include increasing taxes to raise an additional R43 billion over the next two years and reduce the amount it spends with a ceiling of R26 billion.

Concerns were raised that in order to meet the constitutional requirement of progressive expansion of access to public services, available resources were limited.

However, at the same time, proposals had been tabled for “substantial” spending on health, education, defence, social development and infrastructure.

And while there were clear benefits backing the increased spending if done simultaneously,  the strain on finances would be unsustainable.