Financial and Fiscal Commission Briefing and Submission on 2025 Budget
To see the full submission made by the FFC, click here.
The joint meeting with the Standing Committee on Finance and Appropriations provided an in-depth examination of the forthcoming 2025 National Budget, guided by the insights of the Financial and Fiscal Commission (FFC). Central to the discussions were the roles embedded within the Constitution for the FFC, which governs the equitable share and allocation of revenue among various government spheres, emphasizing that parliamentary bodies must heed its recommendations when legislating fiscal matters. The meeting highlighted the 2025 macroeconomic landscape, forecasting modest GDP growth of 1.45% for the fiscal year. The FFC’s analysis underscored significant inflation concerns impacting lower-income households, revealing the regressive nature of VAT and its ineffectiveness as a tool for generating substantial revenue to alleviate fiscal pressures. Additionally, there were discussions around critical issues such as government debt, which was projected to peak at 76.1% of GDP, emphasizing the urgency for stringent fiscal management and a consolidated approach towards a balanced budget.
The budget allocations outlined in the 2025 Appropriation Bill reflected substantial investments in social welfare, with the highest funding directed towards Social Development, illustrating the government’s commitment to poverty alleviation. However, allocations for infrastructure and innovation sector budgets were notably minimal, raising questions about sustainable economic growth strategies. The adjusted figures for provincial and local government equitable shares indicated a need for careful consideration in their implementation, as inconsistencies and lack of clarity concerning funding allocations could lead to tensions in intergovernmental relations. Recommendations from the FFC stressed the importance of establishing a clear fiscal consolidation path, suitable adjustments to the Public Sector Pension Bill, and enhanced transparency in fiscal practices, particularly concerning debt relief measures for state-owned enterprises like Eskom. Such steps are vital in addressing the enduring fiscal challenges and ensuring the effective delivery of services across all government levels.
A clear fiscal consolidatory path is recommended to achieve a zero-balanced budget within three to five years, emphasizing the need for improved forecast accuracy for economic growth essential for financial and fiscal planning. The implications of a proposed VAT increase are under scrutiny for its ability to generate additional revenue, alongside calls for strategic realignments to enhance productivity in public spending by addressing redundancies. The government is urged to accelerate the commitments in the 2024 MTBPS, particularly regarding the public-service wage bill and implementing an early retirement program, to mitigate spending pressures. Concerns regarding the fiscal ambiguities tied to the Eskom Debt Relief Bills necessitate enhanced transparency in the management of public funds, with recommendations for improved governance in State-Owned Enterprises through operational evaluations and asset disposals.
The Commission endorses the primary allocations in the 2025 Appropriation Bill with proposed amendments based on historical expenditure to enhance budgeting efficiency. Ministers are encouraged to reassess mandates to integrate policies effectively, fostering alignment with the strategic goals of the Medium-Term Development Plan, including merging income support programs with infrastructure development. Regarding the Public Sector Pension and Related Payments Bill, the necessity for greater fiscal transparency in pension obligations is underscored. The extensive use of multiple phase-ins and additional allocations outside the provincial equitable share formula raises concerns about fiscal uncertainty. While the incentive grants for education and health sectors are welcomed, greater transparency and criteria are recommended. The Commission advocates for the finalization of a new local government White Paper to address fiscal disparities and expresses worries about the complexities of conditional grants that hinder effective local government spending.
