In July, the main budget deficit recorded a significant deficit of R133.2bn. An acceleration in government spending of 7.9%y/y was the main reason, exaggerated by July being a seasonally low tax payment month. The increase in spending can be ascribed to an acceleration in (1) debt servicing costs (R40.2bn vs. R33.8bn) and (2) disbursements to SOEs of R15.9bn. Eskom received R11.6bn in July, the last tranche of the capital injection of R31.7bn earmarked for the current fiscal year. (Note that Eskom’s F20/21 financial results are published tomorrow).

In February, the increase in government spending was targeted at 2.6%y/y, constrained by the public sector wage bill penciled in to increase by 1.5%. This allowed only for a pay progression. However, the new spending measures announced by President Ramaphosa in the wake of the July riots, at the cost of nearly R37bn, will lift spending by 4.6%. The funding will be provided from the windfall in mining taxes. National Treasury has not yet provided guidance on financing the public sector wage bill, with a price tag of R20bn over and above the baseline forecast. The implementation of the increase is scheduled for September. 

Revenue receipts were 26.9% higher than the same month in 2021. However, July is one of the lower seasonal tax receipt months (R79.8bn was collected compared to R204.3bn in June, a high CIT payment month and amplified by mining taxes). 

Source: National Treasury, ICIB