Budget 2018: Parliamentary Budget Office raises key risks, concerns

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Cape Town – There is a struggle to balance South Africa’s service delivery needs and the need to manage government’s finances, the Parliamentary Budget Office (PBO) told a joint meeting of select and standing committees on appropriations and finance on Tuesday.

The PBO presented what it regards as concerns and risks in Budget 2018.

One of the concerns is regarding the potential impact of the increase in the fuel levy.

The PBO pointed out to the members of the committees that transport costs form a larger share of poorer households’ expenditure. Spatial legacies also increase travel costs for poorer households.

In the view of the PBO fuel taxes are becoming less effective at raising revenue as more fuel-efficient vehicles lower fuel costs. This leads to progressively larger price hikes needed for the state to raise the same amount of revenue.

In the view of the PBO, a viable alternative would need to be found in the future.

The PBO is also concerned about what it deems to be expenditure concerns. It raised, among others, concerns about the amount of duplication of government functions and an increase in claims against government, for instance relating to medical negligence.

The public sector wage bill is another concern of the PBO, especially because of what is perceived to be a lack of increased productivity to go along with increased compensation.

Another concern raised by the PBO relates to spending and reporting on infrastructure projects. An example given is a project to supply railway infrastructure, which was already started a number of years ago, but only a fraction of the delivery has taken place up to now.

Key risks according to the PBO include continued high levels of household and corporate debt in South Africa.

In its view, the increased amount of expenditure on higher education as part of the new fee-free policy may end up not being as effective as has been hoped for. This is because students from poor households must deal with more challenges than just obtaining financial support for education.

The financial and operational health of state-owned enterprises (SOEs) is another key risk highlighted by the PBO. Apart from governance and operational management challenges, it is also concerned by rising costs of inputs and debt due to inefficiencies and a lack of profits.

Two further key risks to Budget 2018 raised by the PBO are the possible effects of the drought and questions regarding the effectiveness of the SA Revenue Service (SARS) in collecting revenue.

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