MTBPS 2023 in a Nutshell

By Alec Hogg

  • Government tax collections for the current fiscal year are R56.8bn below what had been expected just six months ago in the annual Budget. The state’s revenue has been hit by commodity prices falling faster than expected and VAT refund claims growing by more than anticipated.
  • In a desperate effort to balance the books, the finance ministry is cutting R85bn off the state spending that had been projected in February’s Budget; and accelerating plans to raise economic growth by improving the provision of electricity and logistics – ie bringing in the private sector and fixing Eskom and Transnet. 
  • Despite these headwinds, finance minister Enoch Godongwana is determined to post the country’s first Primary Budget Surplus since 2008 – ie where non-interest spending is lower than tax receipts. It’s no great cause for celebration, however, as this “Primary” definition excludes that growing 20% swallowed by interest payments, it’s little more than a step in the right direction.  
  • Overlaying this, the theme of MTBPS 2023 is the urgency with which South Africa needs higher economic growth. That means fixing electricity supply, rail and ports; and executing reforms that will attract investment into infrastructure.  
  • Despite the stated priorities, the ANC’s politically charged COVID-19 social relief distress grant will continue at least until after the election. This despite Treasury flagging it would need to be funded by “a new revenue source or reprioritization of other funding items” – neither of which has been identified.  
  • A rising Primary Budget Surplus (ie revenue exceeding non-interest expenditure) is targeted for the next three years, but even so R550bn in net borrowing is budgeted to fund a continuing overall Budget deficit; debt redemptions; and the Eskom bailout.  
  • Tepid economic growth is expected to continue, falling from 1,9% last year (helped by the post-Pandemic recovery) to just 0.8% this year; 1% in 2024 and 1.6% in 2025. Only in 2026 is economic growth projected to exceed population expansion. Concerns over this poor performance and government overspending has raised the risk premium from investors into RSA bonds. 
  • On average over the next three years, SA’s government will borrow an average of R554bn annually to fund its overspending gap; pay maturing debt; and fund the Eskom debt relief. 
  • SA’s critical debt-to-GDP ratio is now projected to rise to 77.7% in 2026 (up from 73.6% projected six months ago). Reasons: the 2023 public wage service agreement and a fall in taxes from mining companies due to a tempering of the commodity cycle and the Transnet disaster (see below)

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