Stepping up to the Herculean task of steering SA through its current stormy economic waters, finance minister Enoch Godongwana unveiled the 2024 national budget against the backdrop of a critical election year.
With debt levels soaring and revenue under pressure, the task of navigating the delicate equilibrium between sustaining social expenditure and enforcing fiscal discipline was daunting. Yet despite the challenges, the Treasury managed to orchestrate a budget that addressed pressing national priorities while maintaining financial prudence.
One of the most notable features of the budget was the strategic reallocation of resources to safeguard essential services without resorting to severe austerity measures. Despite facing limited resources, the budget ensured that each sector received its due allocation, underscoring a commitment to sustaining vital programmes over the medium term.
For instance, a net reduction of R80.6bn in main budget non-interest expenditure compared to the previous year was achieved, with a significant portion of these savings channelled towards key service delivery departments.
Moreover, the budget underscored the government’s resolve to implement recommendations from previous spending reviews, including the closure or redirection of certain programmes to optimise resource allocation. Such measures are imperative to bolstering economic growth and ensuring the efficient utilisation of public funds.
However, while the budget offered a temporary reprieve, underlying risks continue to loom large on the horizon. The widening budget deficit, estimated at 4.9% of GDP, reflects the ongoing challenges posed by a sluggish economy and dwindling revenue streams. Despite proposed measures to reduce the deficit, projections indicate a modest improvement to 4.5% of GDP in 2024, falling short of earlier targets.
Of particular concern is the escalation in debt-service costs, which have surged to R356bn, surpassing previous projections. Coupled with the anticipated peak in national debt at 75.3% in 2025/26, these developments raise serious questions about the sustainability of the country’s fiscal trajectory.
Looking ahead, there are several key areas that warrant close monitoring. The decision to tap into the Gold and Foreign Exchange Contingency Reserve Account (Gfecra), while necessary in the current economic climate, raises concern about its long-term implications. As Godongwana acknowledged, the fundamental issue lies in the inadequate pace of economic growth to address social inequalities and fiscal imbalances. Urgent measures are needed to reinvigorate SA’s economic growth and alleviate pressure on public finances.
Furthermore, uncertainties surrounding the social relief of distress (SRD) grant highlight the ongoing challenges in reconciling competing demands within the constrained budget envelope. Likewise, the budget's allocation towards municipal debt relief and revitalisation underscores the need for systemic reform to address the deep-rooted issues plaguing local government administrations.
In navigating these challenges, tough decisions lie ahead for the government and the Treasury. Balancing fiscal prudence with targeted spending to stimulate economic growth will require careful deliberation. As we chart a course towards fiscal sustainability, every rand must be spent carefully to maximise its positive effect, and place SA on a more positive economic trajectory that can sustain inclusive growth.
So, while the 2024 national budget offered some glimmers of hope in a difficult environment, the road ahead remains uncertain and fraught with challenges. Only with prudent fiscal management, investments into productive sectors of the economy, and decisive action, will we unleash the full power of SA’s economy and realise a better future for all our people.
• Mogajane, a former director-general of the Treasury, is CEO of the Moti Group.
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