MTBPS: SA economy to grow by 5.1% in 2021 & R450bn allocated to municipalities

Finance Minister Enoch Godongwana said there needs to be economic reform, but has cited better economic growth for this year with the country recovering from the effects of the COVID-19 pandemic.

Finance Minister Enoch Godongwana and his team ahead of his maiden Medium-term Budget Policy Statement in Parliament on 11 November 2021. Picture: GCIS.

CAPE TOWN - Finance Minister Enoch Godongwana said there needed to be economic reform, but has cited better economic growth for this year with the country recovering from the effects of the COVID-19 pandemic.

The new finance minister delivered his maiden Medium-Term Budget Policy Statement in Parliament on Thursday afternoon.

"We now expect the South African economy to grow by 5.1% in 2021 from a 6.4% contraction," Godongwana said.

He went on to say COVID-19 vaccinations were vital to keeping up the momentum.

"The strength of the South African economy recovery will also depend on rollout of vaccines. A higher take up of vaccines will reduce the risk of future waves of the pandemic."

Godongwana said electricity supply problems were also stopping growth and this was being dealt with.

"Instead of securing supply of adding additional capacity to the grid, we have already made significant progress in correcting this: the amendment of Schedule 2 of the Electricity Regulation Act of 2006, has raised the licensing threshold from 1 to 100 megawatts," he said.

Godongwana said private producers would help with this.

He said: "The 25 projects that are part of the latest round of Bid Window 5, will generate more than 2,500 megawatts of power at a weighted average price of 47.3 cents per kilowatt hour."

MUNICIPALITIES ARE A FISCAL RISK

The finance minister flagged local government municipalities as a fiscal risk.

He said 43 municipalities were already in complete financial disarray and the minister said another 100 municipalities risk a similar crisis.

Godongwana said R450 billion would be allocated to municipalities over the medium term and they had worked out a plan to address the 43 municipalities that were in a financial crisis.

The recent local government election results highlighted the electorate's dissatisfaction with local government delivery and Godongwana said February’s national budget would give details on the steps being taken to build more capable local government structures.

On the provincial front, government plans to dole out R2 trillion in transfers over the medium term so provinces can deliver education, health, and social services.

However, Godongwana said there needed to be economic reform.