According to its mid-term assessment, the National Treasury of South Africa predicted larger budget deficits and more debt over the following three years. The Finance Minister of the country will propose tax measures to produce additional money in 2024.
As the country’s utility provider Eskom struggles with problems at its coal-fired power facilities, recurring power outages have been a key impediment to South Africa’s capacity for economic growth during the past 10 years. Growth has also been hindered by Transnet, a state-owned logistics enterprise, performing poorly.
This has led to decreased tax receipts, along with a notable decline in mining revenue as commodity prices decline. According to the treasury, revenue receipts for the current fiscal year 2023–24 are expected to be 56.8 billion rand (USD 3.04 billion) less than what was forecast in the main budget for February 2023.
According to the Treasury, stabilising public finances is still a top priority. Reductions in spending, modest tax revenue initiatives, and government-wide efficiency measures, such as government reconfiguration including the merger or shutdown of public entities, will be used to achieve this.
“Given the extent of fiscal consolidation required, the Minister of Finance will propose tax measures to raise additional revenue of 15 billion rand in 2024/25 in the 2024 budget,” said the Treasury.
Finance Minister Enoch Godongwana stated in his budget address that “our most effective way of funding the government is through an efficient tax administration and by broadening the tax base.” The treasury did not go into detail about the precise initiatives.
The economy of South Africa is expected to increase by 0.8% in 2023, down from 0.9% in February. In 2022, the GDP expanded by 1.9%.
In 2023–2024, a larger consolidated budget deficit of 4.9% of GDP is anticipated, up from the 4.0% deficit in February. The Treasury projects a 4.6% GDP deficit in the upcoming year and a 4.2% GDP deficit the year after that, which is more than the 3.8% and 3.2% deficits observed in February.
It is anticipated that South Africa’s gross debt will increase from 5.24 trillion rand in 2023–2024 to 6.52 trillion rand in 2026–2027. Gross debt is predicted to stabilise at 77.7% of GDP in 2025–2026 as opposed to 73.6% of GDP in February of the same year.
Godongwanam during his speech, further warned that South Africa’s growth prospects are being impacted by a less supportive global economic environment, citing weak growth in China and the risk posed by high interest rates across the world.
Godongwana further noted that the economic outlook over the medium term remained weak, reflecting the cumulative effect of unprecedented electricity blackouts, the vandalised public transport sector, especially rail services, high inflation, rising borrowing costs, and a weaker global environment.
Godongwana, however, noted that there was a sign of resilience in the South African economy, as real GDP, a measure of economic performance, was now above pre-COVID levels.