A side-by-side analysis of SA’s three budgets this year is depressing, showing that the more things change the more they stay the same.
The National Treasury is continuing with its failed austerity policies of the past decade that have resulted in chronically low GDP growth, soaring unemployment, decaying public infrastructure and a rising debt ratio.
To illustrate how daft austerity is, from 2014 to 2024 real (after inflation) per capita public investment collapsed 40%. This explains why so many cities and towns countrywide are filthy, dangerous slums.
In 2016, when Herman Mashaba became mayor of Johannesburg, I looked at the city’s annual report and concluded that it did not matter who was in charge: the capital budget was inadequate to reverse the decline.
Since then the infrastructure backlog has increased to more than R300bn from R170bn, while the capital budget has declined in nominal terms to R7.7bn in 2024/25 from R9.3bn in 2015/2016. Considering inflation and population growth — no-one is sure since Census 2022 botched the count, according to some analysts — this is a decline of almost 50%.
Good luck to Helen Zille if she becomes mayor of Jozi and to current mayor Dada Morero’s bomb squad to revive the city. But this is a digression from the national picture. What logic is there in the Treasury cutting public investment when it has such high GDP and jobs multipliers and can generate the resources to more than pay for itself?
From 2014/15 to 2024/25 real per capita non-interest spending declined 7.5%. The austerity crushed GDP, which grew 0.8% a year from 2014 to 2024. But all the pain over the past decade was pointless because the debt-to-GDP ratio soared to 76.9% in 2024/25 from 43.8% in 2013/14.
Primary budget surpluses since 2023 have strangled the economy and coincided with GDP growth of less than 1% over the past two years. Using a primary budget surplus to reduce debt is like chasing your own tail, because it reduces GDP growth, the denominator in the debt ratio. Yet the Treasury plans to increase primary budget surpluses, and the results will be the same.
Budget 1.0 had a two percentage point increase in VAT, which have raised R184.6bn after subtracting the cost of zero-rated goods. Non-interest spending growth was 5.6% a year, after additional spending of R173.3bn above the estimates in the 2024 budget.
The additional spending included front-line services (R75.6bn), infrastructure (R46.7bn), the social relief of distress grant (R35.2bn), the public sector wage agreement (R23.4bn) and social grants above inflation to cushion the effects of the VAT increase (R23.3bn).
After scrapping the proposed VAT increase in Budget 3.0 the Treasury substituted one way of implementing failed austerity policies with another: spending cuts and other tax increases. Additional spending was slashed to R74.4bn, a decline of R98.9bn. The cuts included front-line services (R34.2bn), social grants (R21.7bn) and infrastructure (R13bn).
Non-interest spending will increase 5.1% a year, lower than what is required to keep up with inflation and population growth. On the revenue side there were tax increases of R96.6bn, including personal income tax (R49.4bn) and other tax measures (R41.3bn).
Since the Treasury has failed to grow the economy, reduce unemployment or stop the increase in debt, it is time for a new leadership that has new ideas on how to get SA out of its worst economic crisis since 1994.
• Gqubule is an adviser on economic development and transformation.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.