Opposition political parties and labour federations dismissed the medium-term budget policy statement (MTBPS) presented to parliament by finance minister Enoch Godongwana as yet another indication the government is failing to steward the economy.
Delivering the MTBPS at parliament in Cape Town on Wednesday, Godongwana laid bare the fiscal crisis dogging the country as he highlighted its low economic growth, persistent power cuts, high unemployment and a worrying rise in the cost of living.
He said government spending had exceeded revenue since the 2008 global financial crisis.
“These rising annual budget deficits have reached an extent where the government will borrow an average of R553bn per year over the medium term. As a result, gross debt rises from R4.8-trillion in 2023/24 to R5.2-trillion in the next financial year. By 2025/26, it will exceed the R6-trillion mark,” Godongwana said.
“We now expect gross government debt to stabilise at 77% of GDP by 2025/26. This is higher than the level we forecast in February. Over the next three years, debt service costs as a share of revenue will increase from 20.7% in 2023/24 to 22.1% in 2026/27. The cost, or interest of this debt, for next year alone amounts to around R385.9bn. Over the MTEF, interest costs amount to R1.3-trillion,” he said, referring to the medium-term expenditure framework.
The finance minister stressed that SA’s big challenge is that rising debt services costs are crowding out important social spending, and that the economy was not growing fast enough to support increasing expenditure and its current debt levels.
DA shadow finance minister Dion George said the MTBPS was another indication the government has no “effective plan to accelerate economic growth, resolve relentless blackouts, stabilise debt, rein in runaway expenditure, support vulnerable South Africans and combat corruption”.
“This MTBPS was confirmation that government simply does not care about the plight of battling South African households who are unable to put enough food on their tables,” George said.
“There was no mention of the so-called food security plan of action to protect consumers from the burden of skyrocketing food prices,” he said.
George said Godongwana could very easily have expanded the zero-VAT-rated basket of food to bring immediate relief to SA households. “He could also have reduced the taxes and levies on fuel, which would have provided further relief.”
George said the medium-term budget did not offer bold action and failed to address the urgent economic crisis facing SA. “The DA’s alternative set out what is possible if the minister was in fact bold, but he certainly was not, and missed an opportunity to set us on the path to a sustainable economic recovery.”
EFF deputy president Floyd Shivambu said: “We don’t welcome this budget as the EFF, we reject it with the contempt it deserves. It’s an austerity budget [coming as] a result of a failing government,” .
Shivambu said the ANC-led government had failed to grow the economy. He said the country’s debt-to-GDP ratio was concerning. “We have a directionless government, they are failing to monitor SA’s economy,” he said.
The MTBPS announced cuts to basic services amounting to more than R13bn, including basic education (R1.7bn), higher education (R2.9bn), health (R1.5bn), social development (R2.1bn), human settlements (R3.1bn), transport (R1.3bn) and water & sanitation (R880m).
Build One SA leader Mmusi Maimane lamented the country’s greylisting, saying South African citizens were now paying more in debt servicing costs. “What this budget indicates is that we are running out of money. Instead of cutting the size of cabinet, they are cutting services to the people. The people lost today, the politicians won,” he said.
IFP deputy president Inkosi Mzamo Buthelezi said his party was not inspired by the budget. “We are not happy as the IFP. SA’s debt remains very high, the cost to service it is high and the public wage bill is also very high, but revenue collection is poor. The issue of bailouts to SOEs [state-owned enterprises] remains a problem.”
ACDP MP Steve Swart said: “We are facing a severe financial crisis; the debt-to-GDP ratio is not sustainable. We hope something happens in next year’s elections.”
Compared with the 2023 budget estimate, debt service costs will increase by R14.1bn to R354.5bn in 2023/24. These costs will reach R455.9bn, or 5.4% of GDP, by 2026/27. As a share of the main budget expenditure, debt service costs will increase from 17.3% in 2023/24 to 19.2% in 2026/27.
Cosatu acting national spokesperson Matthew Parks said the minister lost an opportunity to right the country’s economic weaknesses. “Workers and the entire country looked forward to government tabling a bold, decisive and progressive MTBPS. Tragically, yet again, Treasury failed to rise to the occasion,” he said.
Parks said while Cosatu, a key ally of the ANC, appreciate the real fiscal constraints facing the state and the need to cut fat and reprioritise expenditure, the solutions offered by the Treasury would only serve to choke the economy and weaken already enfeebled public and municipal services.
“What is needed is to grow the economy. That is the only sober and sustainable path to pay down our worrying debt trajectory,” said Parks.
SA Federation of Trade Unions (Saftu) national spokesperson Trevor Shaku said the federation does not agree that debt levels have grown disproportionately. The debt levels are still within a proportionate level when comparing SA with its emerging market peers. “Even the projection that the debt levels would have grown by 77% at the end of the MTEF is still acceptable.”
North-West University Business School economics professor Raymond Parsons said the MTBPS offered a “realistic but vulnerable” fiscal picture for SA. “Several of the fiscal risks outlined in the main February budget have materialised and were recognised by the minister.”
“While it may have been inevitable that the MTBPS has allowed public debt levels to rise even further, it must be seen as a stopgap measure that still needs to be remedied by appropriate economic steps. There was clearly no appetite for tough decisions in the medium-term budget,” said Parsons.
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