Peter pays Paul as government funds run dry

Staff reporter

Bloemfontein – One of Treasury’s tasks is to clearly spell out which tradeoffs must be made, and place them at the centre of the country’s budget process.

This is according to new Treasury director-general Duncan Pieterse.
According to reports, Treasury reportedly suggested to President Cyril Ramaphosa in a meeting about SA’s dire fiscal situation, that the R350 grant could be funded by a two-percentage-point increase in VAT or by ending key state programmes.

National Treasury must ensure that Cabinet clearly understands which tradeoffs must be made, says new director-general Duncan Pieterse.

Pieterse, who was talking to journalists during a South African National Editors’ Forum (Sanef) meeting on Tuesday, did not delve into any issues directly related to the upcoming medium-term budget policy statement (MTBPS), nor a recent report by Sunday Times that Treasury told President Cyril Ramaphosa and other ministers government would have to raise VAT or close dozens of state programmes to be able to continue with the R350 social relief of distress grant beyond March next year.

He did, however, say that while he could not go into details about specific tradeoffs, “one of the tasks we have is placing the tradeoffs very starkly and clearly at the centre of the budget process”.

“One of our roles is to advise the minister and advise Cabinet on what those tradeoffs are and put it in the clearest terms possible.”

He said that if he had to explain it in a conceptual way to ministers, “we are not going to obviously be playing our role as the Treasury – we need to put it in very concrete terms”.

“So when we talk about the tax issues, we go into that detail. When we talk about the spending issues, we go into detail around programmes. And when we talk about the balance between the different elements of fiscal policy and how you calibrate fiscal policy to strike the right balance between debt spending and growth, we go into those details.”

According to the Sunday Times, Treasury reportedly suggested that the R350 grant could be funded by a two-percentage-point increase in VAT or by ending programmes such as visible policing, the expanded public works programmes, the mine health and safety inspectorate, welfare support and environmental protection, among others.

This was all reportedly discussed at a “secret meeting” with the president about SA’s dire fiscal situation, at the Spier Wine Farm last week.

However financial analysts say VAT increases will not make signicanf difference.

“Infrastructure maintenance can be delayed but in years to come we going to have everything will collapse with even high repercussions as we ESKOM and rail way.

VAT increase will not make a difference.”

Another analyst who spoke on condition of anonymity said job bath is looming.

“We are likely to shed 80 000 jobs and that’s more like Peter pays Paul scenario as government prioritise R350 grant recipients.”

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