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Supplementary Budget 2020/21

This special adjustments budget outlines immediate revisions to the 2020/21 spending plans set out in the 2020 Budget Review. More details will be presented in the October 2020 MTBPS (Medium Term Budget Policy Statement).

The first section outlines the economic context we are in at this stage of the COVID-19 pandemic. The second section shows specific financial support for needs created or exacerbated by COVID-19. The third section shows general adjustments - both where budget was taken from, and where it was reallocated, to enable the COVID-19 response.

More detail on all of this information is available in the Supplementary Budget, Division of Revenue Amendment bill and annexures, and accompanying data.

What is happening with the economy?

The economy is maintained by economic activity of the public and businesses - the taxes that generates, foreign trade and investment, as well as careful management by the government. COVID-19 has resulted in significant changes in economic activity locally and internationally, which has severe effects on the economy. That, as well as our government’s response to COVID-19, requires an urgent and significant response by the government to maintain the stability of our economy.

In the absence of drastic action, the economy could collapse and the government would run out of money, and cease to provide public services.

Main budget balance

This shows: We were expecting to spend R368 billion more than we would receive in revenue (taxes, levies, etc) in the 2020/21 financial year. We now expect to spend R709.7 billion more than we will receive in revenue in the 2020/21 financial year. That is because we will spend more, and receive much less revenue.

This is a simplification of what is called the Fiscal Framework - the amount of money we government expects to receive in revenue, and the amount it plans to spend. This is normally only updated once a year, but it had to be updated to deal with the economic situation.

The consequences: That R709.7 billion has to come from somewhere, and usually a budget shortfall is funded by borrowing. Borrowing brings future commitments, namely repaying the loan, as well as the interest on the loan. Depending on who you borrow from, it can also affect your sovereignty - government has less and less freedom in how it governs. When government is unable to meet its repayment obligations, it is called a sovereign debt crisis. When this happens, interest rates and inflation skyrocket, effectively making the public poorer and making borrowing more expensive.

Tax revenue shortfall

We are now expecting to receive R304 billion less tax in the 2020/21 financial year than we anticipated in February 2020

This shows: We now expect to collect R304.1 billion less than what was anticipated when the 2020/21 budget was tabled in February. That is three times the worst shortfall experienced in the last 15 years, in 2009/10.

The consequences: That means we will need to borrow much more money to meet our financial obligations than we expected to. That means we will start the next financial year even more in debt than we expected to be.

Specific COVID-19 interventions

This section shows some of the specific financial support for needs created or exacerbated by COVID-19.

Non-interest increases in expenditure

The largest main budget increase was allocated towards the COVID-19 relief package, detailed further in the Supplementary Budget Review page 8. We look at non-interest expenditure to understand what we are spending on other than interest we pay on loans.

This shows:

R21.5 billion is allocated to the Health Function, since the required health budget is larger than planned in February.

Transfers of R 40,9 billion will be made to support vulnerable households for 6 months.

Funding of R 12.5 billion will also be provided through internal reprioritisation (reductions in other areas) in the education sector to fund COVID-19-related spending and catch-up programmes in the basic and higher education and training sectors.

Local government support of R20 billion is provided for, including an increase of R11 billion in the local government equitable share. A number of public entities, including South African National Parks and the Passenger Rail Agency of South Africa, require substantial support to replace revenue lost during the lockdown and prevent large job losses.

Over the next several months, further spending pressures are likely to emerge. For this reason, the unallocated portion of R19.6 billion is set aside as a provisional allocation towards the COVID-19 response.

The consequences:

The internal reprioritisation in existing budgets to accommodate the changes above means that spending in some programmes in the current financial year is reduced or certain programmes are suspended. See the definition of ‘suspension’ below.

Temporary increases to social grants

This shows: Temporary top-ups to social grants and two new grants introduced.

The Child support grant is topped up with an additional R300 for one month, and subsequently a Caregiver grant is introduced to replace that top-up.

Other grants are topped up by smaller amounts for a longer period.

Adjustments to the 2020/21 financial year budget

The budget for the 2020/21 financial year tabled in February 2020 has to be adjusted to reflect the changes in spending plans. Spending has to be reduced in some areas to finance the COVID-19 response.

Changes to department budgets

Social Development gained the most.

Higher Education lost the most.

The gain showed on National Treasury and Cooperative Governance is actually transfers to provinces and municipalities respectively, not money spent by the departments themselves - it is important to look at the detail under programmes and economic classification - what the money is spent on. This is available in Annexure B of the Supplementary Budget Review and the data published along with the Supplementary Budget.

The 20 programmes with the biggest increase

This shows: The range in changes is massive. The vast majority of the money went to social assistance, police, disease management, and the military.

The 20 programmes with the biggest decreases

This shows: The biggest decrease shown here is the reduction of the Direct Charge against the National Revenue Fund via the department of Higher Education and Training. In the Economic Classification data available in this dataset, it is shown that this is a decrease in the transfer to Departmental agencies (non-business entities). This is not the transfer to higher education institutions.

The second largest decrease is to the Integrated Human Settlements Planning and Development programme of the National Department of Human Settlements.

Explanations of budget adjustments - Cooperative Governance

Details of the adjustments to each department’s budget are available in the annexures to the Supplementary Budget Review.

Here is the table of explanations for Cooperative Governance, for example.

This shows: The largest change to the Cooperative Governance budget was in an increase to the Local Government Equitable Share.

Changes to Conditional Grants

Conditional Grant transfers, many of which were reduced in the budget tabled in February 2020, were adjusted to fund the pandemic response.

This shows: The full R4.4 billion suspension was repurposed within the Municipal Infrastructure grant.

Only R4.4 billion of the R6.6 billion suspension to the Education Infrastructure grant was repurposed within the grant, resulting in a net suspension of R2.2 billion.

The majority of suspensions identified within conditional grants for COVID-19 interventions have been repurposed accordingly within the grants. The largest reprioritisations were to the education infrastructure grant to provide water, sanitation and personal protective equipment to schools, and construct temporary classrooms and fund continual deep-cleaning of facilities; and to the municipal infrastructure grant to provide water to households and sanitise public transport facilities in municipalities that do not receive the public transport network grant.

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Explore the data

Find the data used in the tables of the Budget Review, as well as details of the adjustments by department, programme, subprogramme, and economic classification as Excel files.