MTBPS Red Flags: Debt-service costs a drag on economy
Cape Town - An increase in the remuneration of an already bloated Cabinet, lack of details around how the country will tackle corruption, and government debt, were some of the concerns raised after Finance Minister Enoch Godongwana tabled the 2024 Medium-Term Budget Policy Statement (MTBPS) on Wednesday.
Godongwana said the government forecast real GDP growth of 1.1% in 2024, which is lower than the estimate of 1.3% in February. He said government debt is expected to reach more than R6.05trillion, or 75.5% of GDP, in 2025/26.
“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 government raises this year, 22c of this is paid in debt-service costs.”
Tax collection for 2024/25 is expected to be R22.3bn, lower than estimated in February.
Over the medium term, consolidated expenditure is expected to increase from R2.4trillion in 2024/25 to R2.8trillion in 2027/28.
Godongwana said additional funding is proposed for Parliament and the Office of the Chief Justice for operational capacity enhancement.
Additional funding for the South African Revenue Service is also proposed.
Organisation Undoing Tax Abuse (Outa) CEO and founder Wayne Duvenage voiced concern about the massive 45% increase in the remuneration of MPs. “This is absurd, given the longstanding concerns of a bloated Government, which will now be fatter than ever before.”
Duvenage said they were also “astounded” by the massive increase of R3.5bn allocated to the South African National Defence Force (SANDF) peace-keeping mission in the Democratic Republic of Congo (DRC) when these funds could address some of the struggles in South Africa.
“Outa is concerned about the dilution of direct anti-corruption efforts in this year’s budget. This is evident in the R174m reduction to the National Prosecuting Authority (NPA) budget for salaries … We are also concerned that the police have had R1.5 bn cut from salaries, mainly from administration, but also from visible policing and detectives.”
Independent economist Ulrich Joubert said the speech was “somewhat disappointing” in that there were no specific statements and announcements as to how the government would be implementing the proposals contained in the budget.
He said while the government stated that they would be positive towards private-public partnerships in solving the problems of state-owned enterprises such as Eskom and Transnet, there were no specific indications as to how this process is going to work and how quickly results would be seen.
“What was really of concern was that the revenue that the government is forecasting for this current fiscal year will be R22 bn less than what they anticipated at the time of the Budget in February and, of course, that is because imports were much lower. For example, because of the improved situation at Eskom, they did not utilise their diesel power plants and therefore much less diesel was imported and much less tax was received by Sars by way of smaller imports.”
Education MEC David Maynier said they welcomed confirmation of additional funding from the Budget Facility for Infrastructure, which must be spent to build new schools urgently needed in the Western Cape.
“However, we are disappointed that no additional funding was provided to provincial education departments for teachers’ salaries, which will increase class sizes and negatively affect learning outcomes.”
shakirah.thebus@inl.co.za