The South African Budget Speech of 21 February – delivered with a tone of optimism and commitment – reveals a government grappling with economic challenges while striving for progress.
Prof Joseph Sekhampu, chief director of the North-West University (NWU) Business School, says that upon closer examination, concerns and unanswered questions emerge.
“One notable aspect of the Budget is its recognition of the global and domestic factors influencing economic growth. The minister noted a modest increase in the forecast for global growth, from 3,1% to 3,2% by 2025. However, South Africa's near-term growth remains subdued, with an estimated real gross domestic product (GDP) growth of 0,6% in 2023, down from 0,8%, as projected in the Medium-Term Budget Policy Statement (MTBPS).”
According to Prof Sekhampu, the fiscal outlook presents a murky horizon, with the budget deficit widening from 4% to to 4,9% of GDP, and debt service costs escalating (absorbing more than 20% of revenue). He says despite efforts to contain expenditure and increase revenue through tax proposals, including above-inflation increases in excise duties and carbon taxes, the Budget falls short of providing a credible plan for fiscal consolidation.
“The reliance on debt to finance expenditure raises concerns about long-term sustainability, especially in the current uncertain economic environment.”
Prof Sekhampu points out that infrastructure investment, touted as a key driver of economic growth, lacks specificity and clarity in its implementation. While the minister allocated significant funds to infrastructure projects (totalling over R943 billion), the absence of clear timelines and accountability mechanisms raises doubts about the ability to deliver on these promises.
“Social welfare initiatives received attention in the Budget, but the allocated resources may not be sufficient to address the scale of socioeconomic inequality in South Africa. Despite increases in the value of social grants and support for employment programmes, the Budget fails to outline comprehensive strategies for poverty alleviation and inclusive job-rich growth. Without targeted interventions and a holistic approach to social development, the poor will continue to struggle to access essential services and opportunities.”
Prof Sekhampu says while the Budget reflects good intentions and aspirations for economic recovery and social development, it falls short in providing concrete solutions and actionable plans to address the nation's pressing challenges.
“Without bold reforms and decisive action, the Budget risks being more rhetoric than substance, leaving South Africa's economic future uncertain,” he concludes.
