By Sifiso Sibandze
Based on the King’s directives contained in the Speech from the Throne, the Minister of Finance Neal Rijkenberg is expected to deliver a pro-poor budget on Monday that will be characterized by an increase in social and infrastructure spending.
Strikingly, Rikenberg himself has implied when speaking to the Eswatini Sunday that his budget will be sympathetic to the poor as he has abundantly stressed that he will not be announcing any upward adjustment of consumption taxes which are Value Added Tax (VAT), fuel tax and alcohol and tobacco levy.
The minister said it would not be a smart thing to increase consumption taxes because consumers are still battling with the ever-soaring cost of living.
Rijkenberg also highlighted that the government’s spending will increase this financial year and he will explain the expansionary spending when announcing the budget (tomorrow) on Monday.
The minister’s remarks confirm the general expectation that the government can do more this financial year following improved tax collections locally and externally through the Southern African Customs Union (SACU) and the record-high domestic tax revenue collection.
Having mentioned that he will not be squeezing the already burdened and debt-laden emaSwati, economic experts are of the view that Rijkenberg will be channelling substantial funds to social spending measures that will directly benefit the poor as outlined by the King in The Speech from the Throne.
The economists say a range of programmes which the minister will be focusing on are those identified as poverty-reducing, including spending on primary education, primary or basic health, roads (infrastructure development), rural development, agriculture and anti-corruption.
Economists are of the view that expenditures are critical to the delivery of public services. They help build a social contract and make essential investments in people’s present and future.
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“Investing in these areas such as rural development, agriculture, infrastructure development will result in the creation of thousands of employment opportunities which will benefit the poor emaSwati who are currently not in gainful employment,” Economist Thembinkosi Dlamini said.
He went on to say that: “Channelling of funds to these aforementioned various projects would be a hallmark of a pro-poor budget but a lot needs to be done by the government going into the future.”
Commenting on the minister’s intention not to increase consumption taxes, Dlamini said it was the right decision but the government should also be looking at strategies to expand the tax base by targeting the rich and big companies through introducing capital gains tax.
Dlamini went on to say that he expects the minister to adjust social grants upwards to support emaSwati who are in distress.
“In the past years, the grants have not been increasing and that has greatly affected the vulnerable groups to an extent that they are no longer affording to put food on the table.
The minister should consider raising the social grants by inflation rate to enable the elderly to afford the basics, like food,” he said.
Observably, His Majesty King Mswati III ordered the government to prioritize infrastructure development, agriculture, health, youth empowerment, energy security and tourism. Concerning infrastructure development, His Majesty the King pronounced that major capital projects and infrastructure developments including the start of the Parliament building and Data Recovery Centre must proceed.
The King also ordered that the completion of the International Convention Centre (ICC) and hotel must be prioritised in this financial year.
His Majesty also announced that the strategic oil reserve construction will commence in the next six months and it will fulfil “our fuel sufficiency objectives.”
The King also directed the government to implement a comprehensive national infrastructure programme to upgrade roads, power supply, offices, water, and housing. The country remains with about 400 kilometres of roads that still need to be tarred.
“The status of our rural roads needs improvement, as many of our people and transport operators have appealed to the government to fix and resurface them,” the King said adding that the government should use affordable technologies, which are good for low traffic volumes to alleviate the problem faced by the people.
Judging from the King’s directives, this strongly suggests that Rijkenberg would be ensuring that he pumps in the money to these projects which will result in more employment opportunities, less poverty, better healthcare services, food self-sufficiency, enhanced quality of education, upgraded road infrastructure and clean water and electricity for the population.
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Speculatively, the remarkable increase of the Southern African Customs Union (SACU) receipts by 11.15 per cent from the E11.7 billion received in the 2023 financial year to E13.06 billion strongly suggests that Rijkenberg will present a fully funded budget which would be higher than the E26.4 billion presented in 2023 and with a lower deficit.
For the longest time, Eswatini’s budget has been funded by four revenue components; SACU receipts, grants from development partners, tax revenue collected by the ERS and loans from international lenders.
Combined, the government resource envelope is expected to be above E40 billion, but this does not suggest all the money would be what the government will direct to the national budget.
When announcing last year’s budget, Rijkenberg highlighted that the budget was putting Eswatini on a sustainable economic path, mentioning the country’s fiscal deficit (the difference between the revenue that a country earns and its expenditure) which is usually covered by loans.
In 2020/21 our fiscal deficit was 3.6 cent, in 2021/22 it increased to 6.5 per cent, in 2022/23 it declined to 4.9 per cent. Strikingly, last year’s (2022/23) budget had a fiscal deficit of 2.2 per cent of GDP which was a record low.
Over and above the four conventional ways of funding the budget (tax revenue, SACU revenue, grants and loans) in 2022 the government approached the Johannesburg Stock Exchange (JSE) to raise money for budget support.
In May 2022, Rijkenberg tabled a Bill in Parliament, seeking authority to raise money in the form of several bonds not exceeding E5 billion, through the bond issuance programme listed with the JSE.
Most recently, the minister told the media that they are expecting to receive about E500 million from the JSE in February, adding that he was hoping that this amount will bring them up to date with payments of government arrears.
He stated that should the country try to accelerate coming out of arrears by accumulating expensive debts, it would result in the country plunging into expensive debts.
He said this was the reason why the government felt that the only way to decrease the country’s arrears was through the listing in the JSE where they are hoping to raise E4 billion.
“We plan that the money we will raise in the JSE will settle the country’s arrears once and for all to have this problem put behind us,” he said.
Reijkenberg added that all that was left was that their pricing in the JSE was correct and not rushed, and all that they would get in February would be able to put the country in a good position to make more and have money available.