Finance Minister Enoch Godongwana delivered a fiscally responsible election budget, which will see the government lessening its borrowing requirements this year through a R150 billion draw-down from the contingency reserves, for the first time in 20 years. Picture: GCIS
Finance Minister Enoch Godongwana on Wednesday warned that South Africa's bigger challenge was that its “pie” was not growing fast enough to meet its developmental needs.
Delivering his 2024 Budget in Parliament, Godongwana said it was the size and quality of the pie that informed and ultimately determined the realisation of the political imperative of redistribution.
He told MPs that there were risks to the domestic outlook, including persistent constraints in electricity supply, freight rail and ports, and high sovereign credit risk.
“The government is making the most out of very limited resources. We continue to support economic growth, reduce the growth of government debt and cost of debt and allocate more funds for core services, provide for the social wage and preserve the infrastructure budget,” he said.
South Africa’s near-term growth remained hamstrung by lower commodity prices and structural constraints.
“We estimate real GDP growth of 0.6% in 2023.
“This is down from 0.8% growth estimated during the 2023 medium-term budget policy statement.”
Growth was projected to average 1.6% between 2024 and 2026.
“The growth is supported by the expected easing of power cuts as new energy projects begin production, and as lower inflation supports household consumption and credit extension.”
Godongwana announced that the government had taken a decision to introduce a reform to the gold and foreign contingency reserve account, an account held by the SA Reserve Bank (SARB) that captures gains and losses in the country’s foreign currency reserve transactions to meet borrowing requirements.
He said R150 billion would be drawn once sufficient buffers were available to absorb exchange rate swings and the solvency of the SARB was not compromised.
The government had embarked on broad structural reforms to address the challenges that held back growth.
“This agenda has included areas like electricity, logistics, water, telecommunications and visa reform.”
The minister noted that revenue collection had performed much worse than anticipated and departments had to re-prioritise spending and absorb wage increases within their baselines.
He also referred to “spending additions of R251.3 billion, mainly for the carry-through costs of the 2023-24 wage increase and wage bill pressures in labour intensive departments, including basic education, health and police.”
The Independent Electoral Commission was allocated R2.3 billion to discharge its duties during the elections on May 29.
The police and defence force were also allocated an additional R350 million to support the elections.
A further R200m was allocated for political party funding as parties prepare for the general elections, while R765 billion was allocated to the peace and security cluster to enhance law enforcement.
The Department of Justice and Constitutional Development has been allocated R623 million for the implementation of the Financial Action Task Force recommendation and R2.3 billion was allocated for implementing the Zondo Commission recommendations.
Godongwana announced that R2.3 trillion was allocated to provinces and municipalities over the next three years.
A total of R431.7 billion was allocated to local governments and R2.3 trillion for provinces.
“An additional R105.5 billion is allocated to provinces over the next three years to cover the cost of implementing the 2023 public service wage agreement, mainly in the education and health sectors.
“The provision of these additional funds will cushion the wage bill pressures faced by these critical, personnel intensive departments while freeing up resources for capital investment and goods and services.”
Cape Times