Finance Minister Pravin Gordhan
Photo by: Duane Daws
South Africa’s budget deficit target is seemingly achievable as the South African Revenue Service’s (Sars’) revenue collection for the 2015/16 financial year surpassed the February-revised projections by R2-billion, Finance Minister Pravin Gordhan said on Friday.
Updating the public on the preliminary outcomes of the revenue collection for the financial year under review, he said Sars had collected nearly R1.07-trillion.
In the wake of weakening economic growth, the National Treasury in February revised its initial estimates downward by nearly R12-billion, as a lower growth outlook of 0.9% was expected to impede revenue collection.
“However, tax revenues have been marginally more resilient than government had anticipated. Gross tax revenue for the fiscal year came in at R1.07-trillion or R2-billion more than the February estimate,” he said.
“Given the tough economic environment we are in, this revenue outcome is a great achievement,” Gordhan added, promising to maintain this level of performance.
Sars Commissioner Tom Moyane said surpassing the revenue target was a “great” achievement, as the revenue service agency had never had to collect more than R1-trillion before, forcing it to “think outside of the box”.
Sars had delivered on a seemingly “impossible target”, he said, as it adopted a more hands-on, innovative approach to collecting revenue.
The 2016 Budget had set a consolidated revenue target of R1.32-trillion for 2016/17, or 30.2% of gross domestic product (GDP).
As better-than-expected collection improvements were made during the 2015/16 financial year, Gordhan told media at a briefing in Pretoria that achieving the budget deficit forecast of 3.9% of GDP was now within reach.
Over the years, shortfalls in tax revenue had produced a larger budget deficit, as the National Treasury consistently revised down projected tax revenue, in line with the weaker economic growth.
During the 2016 Budget in February, Gordhan said the deficit was forecast at 3.2% in 2016/17, 2.8% in 2017/18 and 2.4% in 2018/19; improving on the 3.3% and 3.2% outlined in October for 2016/17 and 2017/18 respectively.
However, the Minister warned that, while the latest Budget outlined tough measures to narrow the budget deficit, South Africa’s long-term fiscal sustainability would depend on higher economic growth, which, in turn, stimulated tax revenue.
“It is clear that the global economy is not going to be helpful over the next few years. We need to redouble our efforts to increase policy certainty, catalyse entrepreneurship, innovation and the joint experience of the private sector and the public sector so we can grow this economy. We will need to explore the opportunities that the continent offers,” he said.
Despite the success of the 2015/16 revenue collection, South Africa’s 0.9% growth would still not be enough to fund all of government’s programmes.
“We need to inculcate a culture of efficiency in our approach to spending. We will do everything possible to cut waste, control expenditure, seek value for money and combat corruption where it is found.
“Until we can ignite growth and generate more revenue, we have to be tough on ourselves,” he concluded.