Minister of Finance Enoch Godongwana is set to present the Budget Speech for the 2024/25 fiscal year on 21 February 2024. Providing insights into the anticipated announcements, renowned economist from the North-West University (NWU) Business School, Prof Raymond Parsons, shares his perspectives on what South Africans can expect from this crucial address.
Prof Parsons says budgets always require a delicate balancing act and the 2024 budget, although being crafted in very difficult economic circumstances, ultimately also remains an exercise in political economy.
“Nonetheless, given the major fiscal vulnerabilities and financial realities identified by Finance Minister Enoch Godongwana in the medium-term budget in November 2023, the bar is set high for the main Budget Speech on 21 February,” he adds.
“Against this troubled fiscal background, what must be expected in the budget, is therefore not just an immediate ‘balancing of the books’, but also the emergence of longer-term guardrails and buffers that will prevent South Africa from falling into a debt trap.”
He adds that South Africa’s fiscal “space” has for various well-known reasons shrunk considerably. “This means that thorny but credible policy choices need to be made in the budget about economic growth, government spending, public debt, and taxation to keep South Africa’s public finances on a sustainable path.
“An unsustainable debt trajectory due to unfunded spending pressures or the materialisation of contingent liabilities would be bad news for the economy in several ways. The 2024 Budget challenge will therefore be on how to sensibly manage the inevitable wider deficit and higher debt because of subdued revenue and higher spending that will still be apparent in the pending budget,” says Prof Parsons.
“Difficult trade-offs will therefore be needed in the 2024 Budget at a time when the fiscal room to manoeuvre for South Africa is highly limited, especially in an economy expected to only see about 1% GDP growth this year. The budget needs to unveil tangible outcomes in an appropriate fiscal ‘mix’ that will build credibility and confidence against a background in which key fiscal targets, especially debt ratios, have been constantly missed.
“The overall challenge for the 2024 Budget is therefore to craft a convincing and credible fiscal strategy that helps tailwinds to prevail over headwinds this year by strengthening the country’s economic performance and successfully navigating an uneven economic recovery,” he adds.
Following the Budget Speech, the NWU Business School is set to conduct an online PITSO webinar to delve into the intricacies of the 2024 Budget. Titled "Budget 2024: A Fiscal Soft Shoe Shuffle in an Election Year," the event will dissect the financial landscape in the context of upcoming elections.
Distinguished panellists include Khaya Sithole, a columnist and analyst, Sikhonathi Mantshantsha, a News24 business journalist, and Ray Mahlaka, a business journalist at Daily Maverick.
This virtual discussion will take place on 22 February 2024 and promises an in-depth exploration of the budget's implications and economic considerations during this politically charged period. More information about the PITSO is available here.
