Budget 2024: no substance
CONCERN: DID THE MINISTER DO HIS BEST IN AN ELECTION YEAR TO DELIVER THE GOODS?
The budget had to walk a complex tightrope
There is some good news, but not all economists are happy with it.
Was there any substance to Budget 2024 and did Finance Minister Enoch Godongwana do his best in an election year to deliver the best budget under the circumstances in a weak economic environment?
Independent economic analyst Prof Bonke Dumisa said: “It was really lacking in substance. The only deviation from past budgets was the R150 billion that National Treasury will take from the R500 billion Gold and Foreign Exchange Contingency Reserve Account.
“It is not wise to dip into contingency funds for operational expenses. I am happy he did not say anything about the National Health Insurance (NHI) and value-added tax.” He also found it interesting that 10 000 new police members would be recruited but he was unsure about the real effectiveness of the R61.4 billion for employment programmes.
Dumisa also wondered if the additional R57.6 billion for the salaries of teachers, nurses and doctors would increase government efficiencies or appease the growing public servants’ bill as civil servants are a potential voting pool for the ANC.
Citadel chief economist Maarten Ackerman said although the speech was delivered in an election year, the business sector was relieved it was a “more realistic, debt consolidation budget rather than a populist one”.
“The core issues that face the economy are government’s ballooning debt and contracting revenue on the back of weak economic growth which affect the country’s ability to make ends meet. Thankfully, this budget was designed to stem the tide, albeit with a once-off solution rather than solving the deep structural issues that cause these problems.”
He said the gross domestic product (GDP) numbers in the budget were more realistic than that of last year.
“Government’s projected GDP growth of 1.8% a year by 2027 is realistic. Citadel believes this could be better, thanks to the groundwork done to resolve issues in the energy and transport/logistics sectors and by gearing South Africa for investment in a burgeoning electric vehicle manufacturing industry.”
But he noted the uncertainty over the implementation of a few big-ticket items such as the social relief of distress grant, NHI, a national health information system and a growing government wage bill.
“Of great concern is government’s ability to continue supporting failing state-owned enterprises and dysfunctional municipalities, although the announcement of a programme to reform delinquent municipalities did appear to be good news.”
He said SA’s debt-servicing costs were still the fastest-growing expense in the budget as gold reserves have not rescued us from this fate. “But at least it brings immediate relief and gives us some breathing room to focus on interventions that can help the economy start growing faster again and get us past the election line in three months’ time.” North-West University Business School economist Prof Raymond Parsons said in the face of a daunting combination of economic and fiscal imperatives, Godongwana had given a realistic assessment of SA’s socioeconomic and fiscal challenges, including a high sovereign credit risk.
“The budget had to walk a complex tightrope of tough economic and political decisions within a limited fiscal space. The fiscal mix in the budget sought to find the difficult balance of reconciling what is needed to underpin the economy with continued commitment to fiscal consolidation and containing debt.”
Parsons said the budget recognised the overall need to slow the growth of national debt and lower its cost with several measures intended to bridge the fiscal gap.
But it rightly acknowledged that “the size of the pie is not growing fast enough to meet our developmental needs” and “there are risks to the domestic outlook”.
“One major risk to the fiscal outlook is the continued dominance of interest rate payments in the budget. What is also essential in the aftermath of further bailouts for major SOEs is that continued assistance needs to be linked to productivity and performance gains to avoid perpetuating a situation of quasi-permanent financial relief for ailing SOEs.”
Nedbank economists Isaac Matshego, Johannes Khosa and Nicky Weimar said although Treasury had again signalled its commitment to contain the increase of the public debt stock by keeping on a path of fiscal consolidation, it had opted for the easy way out of a difficult situation by using SA’s gold and forex reserves.