Highlights from Finance Minister Enoch Godongwana’s budget speech

By Mike Cohen

Below are the highlights of South Africa’s 2024 budget released by Finance Minister Enoch Godongwana in Cape Town on Wednesday.

Forecasts

  • The consolidated budget shortfall is forecast at 4.9 % of gross domestic product for the current fiscal year through March. That’s unchanged from November.
  • The shortfall is seen at 4.5% in 2024-25, narrowing to 3.3% by 2026-27.
  • Spending of 2.37 trillion rand ($125 billion) is projected for 2024-25, while revenue collection is seen at 2.04 trillion rand.
  • The National Treasury is on course to achieve a primary budget surplus in the current fiscal year. It will be the first time that revenue will exceed non-interest expenditure since 2008-09.

Taxes

  • Godongwana will raise an additional 15 billion rand in 2024-25, primarily by not adjusting personal income tax brackets to take account of inflation and increasing some excise tax rates.
  • The government projects it will collect 700 million rand more in the current fiscal year than was expected in the medium-term budget in November.
  • A minimum 15% tax rate will be imposed on all multinationals in line with an agreement signed by more than 135 countries.

Debt

  • The debt trajectory has improved because of the government’s decision to tap 150 billion rand in paper profits made on its gold & foreign exchange contingency reserve account and pay down borrowings. It will draw 100 billion rand in 2024-25, and 25 billion rand in each of the following two fiscal years.
    • Gross debt is seen peaking at 75.3% of GDP in 2025-26, as opposed to November forecast of 77.7%.
  • The gross borrowing requirement for the next fiscal year seen at 457.7 billion rand. That compares with 559.6 billion rand envisaged in November.
    • The borrowing requirement is expected to grow to 579 billion rand in 2025-26 and then fall to 428.5 billion rand the following year.
  • Domestic and foreign bond redemptions will average 174.8 billion rand over the next three years.
  • The Treasury intends to raise $2 billion in 2024-25 from international financing institutions and $9.5 billion over the next two years.  
  • The Treasury will propose a binding fiscal anchor to ensure a long-term sustainable path for public finances. For now, a debt-stabilizing primary budget surplus will anchor fiscal policy, it said.

Growth

  • Economic growth is seen averaging 1.6% over the next three years, marginally higher than the 1.4% projected in November.
    • GDP is expected to expand 1.3% this year, and 1.6% in 2025 and 1.8% in 2026.
  • Energy and logistics challenges remain risks to the outlook. Power cuts are expected to gradually ease in 2024.

Spending 

  • Expenditure over the next three fiscal years will be 251.3 billion rand higher than envisioned in November, with most of the money going toward health, education, peace and security, and social development.
  • No money was allocated to bail out struggling state logistics company Transnet.
  • Wage increases that were agreed with labor unions in March last year are provided for in the budget framework.
  • The Treasury allocated 33.6 billion rand to extend the so-called social relief of distress grant, a monthly stipend that was introduced to shield the vulnerable against the fallout of the coronavirus pandemic, until March next year. Provisional allocations of 35.1 billion rand and 36.7 billion rand for the 2026 and 2027 financial years, respectively were made pending a decision on how it would be funded. 

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