BUDGET 3.0 | Health, learning, community spending scaled back

Consolidated government expenditure detailed in Wednesday's budget has dropped from R2.60-trillion to R2.58-trillion, with spending on social services largely getting the short end of the stick in spending reprioritisation.

Finance minister Enoch Godongwana tabled a budget for a historic third time in a calendar year. This was due to the last-minute postponement of the first budget in February due to a proposal for two VAT hikes, and a legal challenge to the budget tabling in March, which proposed a single VAT hike.

Tabling the budget in a joint sitting, the minister said the past two months provided “valuable lessons” that would inform how the National Treasury manages the budget process in future.

An inflationary increase to fuel and diesel is proposed in the latest budget overview to partially cover gaps left by the absence of a VAT hike.

“The reality, however, is that this decision to do away with the VAT increase, without a viable alternative source of revenue, significantly reduced our ability to fund additional government programmes and projects to the extent we had deemed necessary,” said Godongwana.

Nevertheless, the minister said, the budget supports sustainable finances, the social wage and investment in economic growth. “This is not an austerity budget,” he insisted, adding that non-interest expenditure increased by an average of 5.4% over three years, at 0.8%.

Briefing journalists before the tabling of the budget, Godongwana said fiscal consolidation was a difficult exercise which required the Treasury to get political support for its revised spending plans, which now need to accommodate the absence of a VAT hike.

“When you do fiscal consolidation, you are doing it in conditions not of your own choosing. Even looking at your own party ... it’s contested, because it is a painful exercise. That’s why you need political buy-in.”

He said as soon as the division of revenue bill is passed by both houses of parliament, the money goes to the provinces. On whether there would be fallout due to the scaled back expenditure figures, the minister acknowledged that some state priorities could come under pressure.

Godongwana said spending adjustments were limited to a few departments and the social wage remained at 61% of consolidated non-interest spending over the 2025 medium-term expenditure framework (MTEF).

“Total consolidated spending is expected to grow at an average annual rate of 5.4%, from R2.4-trillion in 2024/25 to R2.81-trillion in 2027/28. Economic development is the fastest-growing function over the MTEF period, with an average growth rate of 8.2%.”

The overview said total functional allocations amounted to R6.69-trillion over the MTEF, with proposed additional spending reduced from R232.6bn to R180.1bn over the MTEF to align spending with revenue proposals while protecting frontline services.

By the numbers

The total social services spending programme went from R1.52-trillion in the February budget to R1.50-trillion in the latest version tabled this week. Importantly, these are rand and cents expenditure estimates where inflation is not taken into account.

Expenditure targeted towards learning and culture went from R508.7bn in the February budget to R505.6bn in the May version. Basic education bore the brunt of cuts in the category, going from R332.3bn in February to R329.2bn in the May version. Spending in the remaining items under learning and culture stayed the same, in terms of rand and cents.

In health, expenditure went from R298.9bn to R296.1bn, with district health services going from R131.1bn to R130.9bn, central hospital services declining from R58.3bn to R57.8bn, provincial hospital services going from R49bn to R48.5bn, and other health services decreasing from R47.5bn to R47.1bn. Only facilities and management maintenance stayed at R11.9bn in this category.

In the community development category, expenditure goes from R286.6bn in the February budget to R280.4bn. While the municipal equitable share stay the same at R106.1bn and human settlement water and electrification stays at R58bn, public transport goes from R67.7bn to R63.8bn, and “other human settlements municipal infrastructure” drops from R54.8bn to R52.6bn.

Social development spending goes down from R427bn in the February budget to R420.1bn in the May version. This sees old age grant spending go from R118.8bn in February to R117.4bn, while child support grant spending declines from R93.5bn to R90.4bn.

Social security funds and provincial social development spending remain unchanged at R99.5bn and R23.3bn. Spending on “other grants” goes from R77.1bn to R77bn. The total public services expenditure goes from R78.7bn in February to R80.7bn in this week’s budget overview.

These reductions essentially mean the minister is reversing the provisions that the he announced in the March iteration of the budget.

Public administration and fiscal affairs is the sole beneficiary of this bump in expenditure, with expenditure to go from R51.7bn as outlined in the February budget to R53.7bn in the latest overview.

Peace and security go from R267.6bn in the February budget to R263.2bn, with defence and state security going from R60.8bn to R59.7bn. Law courts and prisons go from R58.1bn to R57.2bn while expenditure on home affairs drops from R15.4bn to R12.9bn.

Conversely, spending on the economic development front remains at R289.8bn while spending on economic regulation, infrastructure, industrialisation, exports, agriculture, job creation and innovation all stay the same.

Debt service costs go from R424.2bn in the February budget literature to R426.3bn in this week’s budget overview. The contingency reserve goes from R8bn to R5bn.