Surprise-free 2023 budget speech
The 2023 Budget Speech was a surprise-free, pragmatic, and credible response to a challenging set of global and domestic economic circumstances. Finance Minister Enoch Godongwana, although enjoying some windfall tax-revenue gains, still had a difficult balancing act, given the political and economic constraints within which he had to shape fiscal policy. South Africa’s public debt remains high and is set to stabilise at 73.6% of GDP in 2025/26 – three years later and at a higher level than projected in the 2022 MTBPS.
Fiscal risks, therefore, still exist over the next few years. These risks broadly arise from factors such as the management of the major Eskom debt-relief framework, the final outcome of the public sector wage negotiations, and ultimately the impact of low GDP growth on tax revenues. Several major state-owned enterprises also continue to rely heavily on government bailouts. Higher tax revenues depend on sustained future investment and economic growth.
While the substantial debt-relief arrangement for Eskom is inevitable, it must be implemented in a way that overcomes the causes of the current malaise and supports the rapid development of the power sector as a whole to meet the critical supply and environmental problems being faced. The tax incentives to business and households to install solar panelling are welcome, although the threshold for households appears to be quite conservative.
The Treasury assumption of an average GDP growth rate of 1.4% over the next three years underpinning the budget strategy may be too optimistic, compared to the SARB and other recent forecasts of about 0.7% over the same period. It is also clear that South Africa’s future growth prospects are now less dependent on fiscal policy than on the ability of the rest of the Cabinet to implement the economic and energy reforms needed to give South Africa much higher job-rich growth.
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