Budget won’t cut poverty or create jobs — Institute for Economic Justice
The National Treasury’s determined pursuit of a primary budget surplus and debt stabilisation conveyed in its 2024 budget means sacrificing public services and long-term economic growth, says the Institute for Economic Justice (IEJ).
Finance minister Enoch Godongwana tabled the budget in parliament on Wednesday.
The institute said previous and planned budget cuts made it impossible to fund government programmes adequately.
“Previous failures to achieve lower debt through budget cuts call this fiscal strategy into question. Evidence indicates that austerity leads to a decrease in GDP, resulting in a higher debtto-GDP ratio. The present fiscal strategy is self-defeating.
“Tragically for the millions excluded from our economy, this budget will not create jobs or reduce poverty.”
Treasury budget office head Edgar Sishi said at a budget briefing for a joint meeting of parliament’s four appropriation and finance committees on Thursday that a primary fiscal surplus was necessary as mounting debt service costs (R386bn in 2024/25) crowded out spending on services and constrained investment, growth and economic recovery.
“The way you address that is by stabilising debt as a percentage of GDP by tabling a primary fiscal surplus,” he said.
This policy will see gross loan debt fall to 74.7% in 2026/27, debt service costs decline by R30.2bn over the next three years and the consolidated budget deficit reach 3.3% in 2026/27.
A primary budget surplus (when income exceeds noninterest spending) was achieved in fiscal 2023/24. Relative to expected inflation, there will be a real decline in spending on nearly all government functions.
The institute said that in addition to the R150bn the Treasury planned to draw down from the Reserve Bank’s gold and foreign exchange contingency reserve account there were other idle sources of revenue that could be tapped rather than impose budget cuts.
Despite pressing social needs, government spending on essential social and economic priorities continued to fall, with R270bn being cut between 2019/20 and 2026/27 in main budget non-interest expenditure. This was on top of budget cuts from 2014 to 2019.
The IEJ said the Treasury’s debt targets in the 2024 budget were more severe than in the 2023 medium-term budget policy statement and previous budgets.
“Whereas the 2021 national budget considered the stabilisation of debt at 88.9% in 2025/26 as ‘a sound platform for sustainable growth’, the Treasury now aims for just 75.3% in that year.
“However, such forceful debt stabilisation is unnecessary. SA debt levels are in line with our peers, with emerging-market and middle-income countries averaging 69% in 2023.”
The institute said that rather than reduce debt, the government should prioritise reducing the high cost of borrowing through Reserve Bank intervention, targeted capital controls, capital management techniques and credit allocation policies.
This would allow fiscal policy to prioritise growth and employment generation, support industrial policy and expand social spending.
There were also avenues open to increase revenue. Possible areas of taxation were the R65bn in retirement fund benefits given to those earning above R750,000; R12bn in medical aid tax benefits given to those earning above R500,000; R7bn wasted on the employment tax incentive; R70bn-R160bn in a potential wealth tax; more than R40bn from taxing financial transactions; R12bn wasted on the ineffective corporate income tax cut; R64bn from a slidingscale social security tax; R38bn in resource rents; and R9bn to be raised from a luxury VAT rate.
The IEJ lamented social grant payments not having kept pace with inflation and the social relief of distress grant budget being slashed from R44bn in 2022 to R33.6bn in 2024 so that fewer people would get grants. The grant remained at an inadequate R350, it said.
More resources were needed to scale up employment programmes and for public sector investment instead of government unrealistically relying on the private sector.
“The government’s quest to rapidly reduce the unemployment rate is completely undermined by Treasury’s allocations towards economic development. Average real spending growth on the drivers of economic growth tumble over the medium term,” the IEJ said.
The Black Sash called for addressing poverty to be made a priority as “the situation for millions of South Africans has become life threatening”. This should include increasing grants substantially, including the R350 social relief of distress grant.
“The minimal increases to the child support grant and foster care grant are shocking and fail to address the lived reality and struggles faced by caregivers for children,” the organisation said in a statement.
“We implore the minister and Treasury to consider the fiscus from a human rights perspective rather than affordability.”