Given the fine budgetary line that still had to be walked by Finance Minister Enoch Godongwana, the first Medium-Term Budget Policy Statement (MTBPS) of the Government of National Unity (GNU) comes across as a pragmatic, realistic and credible strategy to tackle South Africa’s challenges of low economic growth and high public debt again.

In commenting on the MTBPS of 30 October, Prof Raymond Parsons, economist from the North-West University (NWU) Business School, says the 2024 MTBPS was broadly aligned with the overarching commitment of the GNU to higher inclusive economic growth and job creation.

“It is welcome news that South Africa is now achieving a primary budget surplus, and that the debt-to-gross domestic product (GDP) ratio is to be stabilised at 75,5%, although debt reduction is to be spread over a longer period. Also, the risks to the fiscal outlook remain elevated. On the spending side, the public sector wage bill remains the biggest single immediate risk to South Africa’s public finances.”

Prof Parsons points out that the emphasis in the 2024 MTBPS was to further consolidate longer-term fiscal buffers and guard rails that must help to ensure fiscal sustainability. The fiscal data and commitments supporting the MTBPS will nonetheless need to be further interrogated when the promised Medium-Term Development Plan is available in January, and the main Budget is presented in February.

“In identifying better growth prospects for a more sustainable future fiscal balance, the MTBPS has now been able to build on the policy momentum created by the GNU, as well as the tangible evidence of an incipient economic recovery.”

According to Prof Parsons, the MTBPS also recognises the importance of unleashing investment and infrastructural development as the kingpins of sustained stronger growth and job creation.

“The emphasis in the MTBPS is therefore on investment-led growth, with increased participation for the private sector. The Finance Minister is right to say that South Africa’s problem is basically a growth one. The MTBPS assumption of a modest average 1,8% GDP growth over the next three years reinforces the need for an action-orientated agenda to improve on these growth prospects.”

Prof Parsons says what South Africa needs is a couple of years of steady and irreversible economic growth to convert short-term business confidence into long-term investor confidence.

“This means that the GNU must ‘stay on message’ regarding its economic commitments in the period ahead. The latest MTBPS has outlined a new sense of economic direction which, if properly implemented, would now make it easier over the next three years to strike the right balance between growth-enhancing measures on the one hand, and stabilising the still challenging high debt-to-GDP ratio on the other.”

He says the challenge to GNU policymaking is therefore to create a macro-economic environment indisputably based on the pillars of efficiency, stability, consistency and certainty, which would also resonate with the theme of South Africa’s presidency of the G20 in 2025.