2024 Budget hits and misses experts disagree with outlook
DESPITE Finance Minister Enoch Godongwana's optimism that easing power cuts will increase economic growth over the next two years, economists are wary of any major improvements amid ongoing infrastructure-related challenges in the country.
While the minister, who delivered the 2024 budget last week, expects a 1.6% growth by 2026, Economist at the University of Zululand, Professor Irrshad Kaseeram says challenges with the rail network and at ports continue to be a contributing factor in the country’s stunted economic growth.
“Most economists disagree with the minister’s optimistic outlook for the next two years, given electricity provision hasn’t improved nor has the challenge in rail, harbour and road connectivity to improve efficiencies,” said Kaseeram.
In his speech, Godongwana revealed that South Africa’s ‘near-term growth remains hamstrung by lower commodity prices and structural constraints’.
“We estimate real gross domestic product (GDP) growth of 0.6%. This is down from 0.8% growth estimated during the 2023 MTBPS,” the minister said.
The deficit for this year is estimated to worsen from 4% to 4.9% of GDP.
Professor Kaseeram says this implies that ‘debt-service costs will be an additional R15.7billion to R356-billion.
“In other words it will absorb 20% of the tax revenue! The other alarming
point to note is that debt will now peak at 75.3% of GDP over the next two years, the minister promises that debt will stabilise by 2026,” said Kaseeram.
“Despite the challenging fiscal situation, the minister plans to stabilise the country’s debt at lower levels than previously estimated by tapping into the unrealised capital gains on the country’s gold and foreign exchange
reserve account to the tune of R150-billion.
“Many economists think this is dangerous because such a move could raise inflation and hence interest rates or leave the Reserve Bank short of reserves to fight currency speculators, which means the rand could depreciate further, causing higher costs in imports, fuel and debt service charges.
“All this could cause the economy to further deteriorate,” he said.
On the positive, however, the Unizulu professor notes the allocation of R251.3-billion to secure the salaries of teachers, doctors, nurses and police.
Additionally, R7.4-billion has been allocated for the presidential employment initiative as the country continues to fight high unemployment.
Reacting on the budget allocations, SALGA KZN Chairperson Thami Ntuli expressed disappointment with the minister's failure to help mid-cities such as uMhlathuze amid 'failures by Transnet Freight Rail'.
Ntuli said they had proposed that mid-cities should benefit from the fuel levy to compensate for trucks damaging municipal roads.
He further denounced the 'Minister of Finance’s relentless defunding of municipal basic services, healthcare, the police, and education'.
"Local government provides 40% of all government services, but municipalities still receive below 10% of the budget," he said in a statement.
The Salga chairperson however commended the introduction of a R2-billion rand grant for municipalities to roll out smart prepaid meters.
"This will assist municipalities in curbing electricity losses.
"SALGA also commends other initiatives that have the potential to stimulate local economic development, such as increases in pension grants. The progress made to reform pension funds is also commendable."