Significant resources will be budgeted to fight the pandemic. South Africa has started the first phase of acquiring the vaccine for COVID-19. An initial payment of R283 million was paid in December 2020 as a deposit to secure the vaccine. With the aim of vaccinating nearly 67% of the population to attain herd immunity, we can expect the bulk of the budget allocation to go towards the health cluster, which will drive the national rollout of the vaccine programme. In addition to acquiring the vaccine, a massive public rollout of the vaccine is also anticipated. Government is expected to centralise this rollout programme, with added support from the private sector with regards to distribution and administration of the vaccine.

SOEs play a crucial role within South Africa’s economy. In the 2020 financial year, a number of bailouts were made to struggling state owned entities including South African Airways (SAA) and Eskom. In the 2020 Budget Speech, Eskom remained the top priority with a stable electricity supply. The Finance Minister cited this as “our number one task.” The beginning of the 2021 calendar year has been met with a new rollout of managed load shedding by Eskom. Provisions to get Eskom back on track have required continued financial investment by the government in the entity. Over the next three years the State will transfer R112 billion to Eskom, compared with the anticipated R69 billion previously budgeted. The State has committed to inject R23 billion annually into Eskom for the following seven years. Since 2008, SAA has incurred losses of R32 billion, and will receive a further R16.4 billion from taxpayers in the next three years, which has been put aside to settle the airline’s liabilities and interest. Stabilising our SOEs has become one of government’s top priorities as they will be primarily responsible for the successful rollout of the state’s public infrastructure programme. 

Over the Medium Term Expenditure Framework (MTEF) period, R815 billion has been allocated to infrastructure spending. SOEs continue to be the largest contributor to capital investment, spending a projected R314 billion over the next three years. In the face of wide-ranging cuts to public sector spending, the National Treasury is still committed to capital spending to drive the Government’s Infrastructure programme.  During his State of the Nation Address, President Ramaphosa reported that the Infrastructure Fund implementation team had finalised a list of “shovel-ready” projects, with a potential investment of R700 billion over ten years. In addition, Minister Mboweni also announced that over the next three years, the Development Bank of Southern Africa (DBSA) will package blended-finance mega-projects to the value of at least R200 billion - in line with the President’s announcement. Despite heavy cuts across the 2020 budget, infrastructure spending has been allocated at over R800 billion for the next three years. This allocation should help overcome social and economic infrastructure backlogs (energy, housing, roads and transportation).

In the last Budget Speech, the Finance Minister outlined several cuts aimed at reducing public spending, with the largest reductions applied to the human settlements and public transport sectors. The need to direct constrained resources to areas that have a high social impact and the largest economic multiplier, while outlining measures to deal with wasteful expenditure; is of great importance. Cuts in the public sector wage bill have also been announced. A recent freezing of public sector salary increases has been met by resistance from the public sector unions. Recent announcements from the unions suggested a protracted legal battle with the government and possible industrial action by the unions could be a possibility.