Medium Term Budget Policy Statement

Medium Term Budget Policy Statement


On 25 October 2011 Finance Minister, Pravin Gordhan, tabled the Medium Term Budget Policy Statement (MTBPS) at a sitting of the National Assembly. The MTBPS broadly outlines Government’s proposed spending plans for the next three years. It also provides an opportunity for Government to make adjustments to this year’s budget to cater for changes in expenditure and provide for unanticipated expenses. Here are some of the highlights.

GROWTH: The economic growth forecast for 2011 is cut to 3.1%, rising to 3.4% in 2012, 4.1% in 2013 and 4.3% in 2014.

INFLATION: The headline consumer price index (CPI) is expected to average 5% in 2011 and remain below 6% over the next three years, within government’s 3% to 6% target range.

CURRENT ACCOUNT: The current account deficit is seen widening over the next three years from 3.4% of gross domestic product (GDP) in 2011 to 3.8% next year and 4.2% in 2014 as import growth outpaces export growth.

BUDGET DEFICIT: The Treasury plans to trim the budget deficit to 3.3% in the 2014/15 financial year from 5.5% in 2011/12.

DEBT: National government net loan debt is projected to rise from just over R1 trillion at the end of 2011/12 to more than R1.5 trillion by 2014/15.

TAXES: Total government revenue, as a percentage of GDP, is seen falling slightly from an estimated 27.3% in 2011/12 to 27.0% in 2012/13 before reaching 27.7% in 2014/15.

SPENDING: Total government expenditure as a percentage of GDP is seen declining gradually over three years, from an estimated 32.9% in 2011/12 to 32.2% in 2012/13 and 31.0% in 2014/15. The budget framework provides for a 5% annual cost of living adjustment for public sector employees.

REVENUE: Tax revenue projection for 2011/12 is cut by R13bn to R728bn from R741bn – mainly on VAT receipt revisions – before recovering to R812bn in 2012/13.

TAX: The government says it will consider policy measures to raise tax revenue if the economy fails to recover as predicted.

JOB CREATION: Government will provide R25bn over the next six years to boost industrial development zones, assist job creation and support transition to a green economy.

HEALTH: Treasury backs 10 pilots of the proposed national health insurance scheme, with further funding details expected in February 2012.

CLIMATE: South Africa is to strengthen climate change policies and seek global and private sector funding for green interventions over the next three years.


  • With the Government having committed to spend money on many of the issues listed above SARS is going to be put under enormous pressure to increase tax collection.
  • This will be done by upping their enforcement activities, most probably in the form of more integrated field audits.
  • We have already seen more PAYE/UIF/SDL audits being conducted and are now expecting Company Income Tax to come under the spotlight.
  • With many companies under significant financial pressure because of the economic downturn, additional pressure from SARS will make the administering of a business significantly more difficult.
  • SARS will ratchet up the pressure on companies to ensure compliance and show far less leniency when uncovering tax irregularities.
  • It is certainly advisable to keep firm control on compliance issues and to take no chances with intricate, ‘innovative’ tax planning schemes. These tax planning schemes will be investigated and punishment metered out if they prove to be illegal.

There are certainly tough times ahead. Spare a particular thought for Minister Gordhan…