Finance minister Enoch Godongwana has presented a budget with the election in mind, according to analysts who say the 2024 national budget was designed to boost the ruling party’s campaign through expanded social support and no new tax measures.
Godongwana’s claim that the government would also achieve a primary budget surplus in 2023/24 with debt stabilising by 2025/26, was “smoke and mirrors”, CEO of Eunomix, a geopolitical and country risk consultancy, Claude De Baissac said on Thursday. It was not a surplus in the real sense of the term because the government was cashing in on the Reserve Bank’s reserves.
“This means that the Reserve Bank will have a smaller reserve to shore up the rand, and thus control inflation. All the government has done is take someone else’s asset and put it into its balance sheet. It’s a loan under another term, but one that allows the government to write it as an asset rather than a liability,” De Baissac said.
“Pure electioneering, this Reserve Bank ‘profit’ is a con ahead of an election,” he said. As for the projected reduction in national debt, “this contrived commitment has been standard government fare for nearly a decade”.
Godongwana presented his budget in parliament on Wednesday, a day after the office of President Cyril Ramaphosa announced May 29 as the election date for national and provincial elections.
The announcement came after Ramaphosa — who swept to power on promises to revive the economy, put millions of South Africans into jobs and fight corruption — met the Electoral Commission of SA (IEC) and premiers of SA’s nine provinces to discuss the state of readiness for the elections.
Plausible path
In his budget speech, Godongwana tried to present a plausible path to halt SA’s public debt spiral. He was also more upbeat about the pace of structural reforms, which if implemented, would increase the country’s economic growth prospects.
The “con” De Baissac refers to ahead of elections is the excess that was made possible by a distribution totalling R150bn from the Gold and Foreign Exchange Contingency Reserve Account (GFECRA).
Godongwana said the Treasury would achieve a primary budget surplus in 2023/24 with debt stabilising by 2025/26. For the first time since 2008/09, he said, the government would achieve a primary budget surplus — meaning revenue exceeds non-interest spending.
“Over time, as the debt burden decreases, maintaining this critical benchmark will create fiscal space.”
According to the Treasury, gross government debt is now projected to reach R5.2-trillion, or 73.9% of GDP, in 2023/24. Gross loan debt is expected to stabilise at 75.3% of GDP in 2025/26, slightly lower than the 77.7% projected in the 2023 medium-term budget policy statement.
Louw Nel, senior political analyst at Oxford Economics, said difficult decisions were deferred and the tapping of the GFECRA to plug the gaping hole in Godongwana’s budget spoke to desperation rather than shrewd financial management.
“Criticism from opposition parties that this was an ‘election budget’ is fair comment ... so too are comparisons with Ramaphosa’s state of the nation address which was designed to highlight the achievements of successive ANC-led governments over a 30-year period and leave listeners with the impression that everything is in hand,” Nel said.
Despite Godongwana’s best efforts, the national mood going into the election would be sour, he said. “But it could have been worse, had he not made the decisions he made.”
Nel said Godongwana was careful not to announce any new tax measures that would significantly affect individuals — leaving income tax, VAT and fuel levies untouched — but neither did he announce any inflation-related adjustments to tax brackets.
Feel-good effect
At the same time, Godongwana announced a R30bn inflation-linked hike in key social grants, including the old age, disability and child support grants, as well as the anticipated extension of the social relief of distress grant first introduced during the Covid-19 pandemic, Nel said.
“The individual amounts are not enormous, but the R100-a-month increase in the old age grant, for example, will have a feel-good effect which, coming into effect on April 1, is fortuitously timed considering the May 29 election date,” he said.
Godongwana earmarked additional cash, R2.3bn, for the IEC and R350m for security forces to make sure the general elections in May proceed without trouble, he said.
“Eyebrows were raised when he added another R200m towards political party funding as parties prepare for the general elections,” Nel said. “The lion’s share of these funds will go to the ANC, the biggest party in parliament.”
Nel said there was also no announcement of any major bailouts for the country’s ailing state-owned entities, “no doubt mindful of how these stir tempers”.
There was also the imminent introduction of the National Health Insurance (NHI) scheme, with R1.4bn appropriated for its rollout. “Ramaphosa made much of the NHI, saying the bill was on his desk and he was ‘looking for a pen’ to sign it into law’.”
Many commentators had pointed out that the country’s health system was ill-prepared for the introduction of universal healthcare, Nel said.
“But in his speech, Godongwana seemed to concede this, saying there remains a range of system-strengthening activities that are key enablers of an improved public healthcare system that must be undertaken.
“This means the NHI Bill is likely to be enacted soon, no doubt to much fanfare, but the real work of rolling it out will only come later.”
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