Treasury X
Finance Minister, Enoch Godongwana, said the government was forecasting real GDP growth of 1.1% in 2024, lower than the 1.3% forecast in February.
The Minister was tabling his medium-term budget policy statement in Parliament on Wednesday afternoon, where many have raised concerns about cuts to an already tight budget.
He said over the medium term, growth is forecast to average 1.8%.
Godongwana said the so-called mini budget outlined the government's strategy to lift the economy to a higher and more inclusive growth path, with this strategy is anchored on four pillars:
Godongwana said the government’s fiscal strategy sets out to achieve the fiscal sustainability needed to support inclusive economic growth.
“It carefully weighs competing demands, making the necessary trade-offs between what is most urgent and what must wait given the fiscal constraints,” he said.
Meanwhile, the Minister highlighted that to achieve the goal of the fiscal strategy, government has to manage its debt better, warning that South Africa’s debt has risen too fast and is too high.
He said the Treasury was anticipating that government debt would reach more than R6.05 trillion, or 75.5% of GDP, in the 2025/2026 financial year.
“We know that our debt is unsustainable, because debt-service costs have become the largest component of our spending, and it is rising faster than economic growth.
“Debt-service costs will reach R388.9 billion in the current financial year.
“Put differently, this means for every one Rand of revenue that the government raises this year, 22 cents of this is paid in debt-service costs,” Godongwana warned.
The finance minister also noted that tax revenue for this financial year is expected to be R22.3 billion lower than what was estimated in February.
“Over the next two years, the main budget revenue estimate has also been lowered by R31.2 billion.
“In the absence of faster growth and in the face of external risks, tax revenue will remain under pressure, forcing us to make difficult decisions on where to spend.
Lower revenue also means that we cannot, within the envelope, accommodate all of the demands on the fiscus,” Godongwana said, adding that difficult trade-offs, in all spheres of government, will have to be made.
“By sticking to our debt-reducing strategy and confronting these trade-offs, we can create the necessary conditions for a fast-growing economy that facilitates employment.
“Our most immediate spending pressures will be addressed, despite the weaker revenue,” the Minister said.
