Text of the letter from National Treasury to Head of Department, Provincial Treasury, Provincial Government of Kwa-Zulu Natal, 31 August 2023
COST CONTAINMENT MEASURES TO ASSIST NATIONAL DEPARTMENTS, PUBLIC ENTITIES AND PROVINCES TO CLOSE FISCAL GAP
At its 15 August 2023 meeting, Cabinet noted that the economic growth outlook has worsened significantly relative to expectations outlined in the 2023 Budget, given the impact of more intense loadshedding and freight and port logistical constraints, amongst other factors. In addition, the fiscal outlook was negatively affected by the higher-than anticipated wage settlement.
In briefings to Cabinet, the Ministers' Committee on the Budget (MINCOMBUD), the Forum of South African Directors-General (FOSAD) and the Budget Council, the National Treasury outlined how low economic growth has resulted in deteriorating revenue collection and funding conditions since the tabling of the 2023 Budget. To date, tax revenue under-collection has worsened, already resulting in a lower projection of the revenue estimate for 2023/24.
Funding performance through the debt markets has also been poorer than anticipated over the past few months. As a result, we face unprecedented challenges for the current 2023/24 financial year, even as we hope conditions will improve over the medium-term, once the underlying factors like loadshedding and logistical constraints are addressed.
These lower funding collections require an urgent conversation in government on how to restore the public finances to a sustainable path, both for the current 2023/24 financial year, as weil as for the coming 2024/25 medium-term expenditure framework (MTEF).