Budget 2024: Finance Minister was jolly as debt service declines

Minister of Finance Enoch Godongwana delivering his budget Speech. Picture: Ayanda Ndamane / Independent Newspapers

Minister of Finance Enoch Godongwana delivering his budget Speech. Picture: Ayanda Ndamane / Independent Newspapers

Published Feb 22, 2024


Finance Minister Enoch Godongwana was in a jolly mood when he addressed the media ahead of his third Budget speech.

He noted that his speech was late in being distributed to the media “due to cost containment measures that meant that some printers were not available”.

In response to some questions by the media he quipped that he could not answer them because “those are above my pay grade”.

The reason for this ebullience was the R150 billion “gift” provided by tapping the South African Reserve Bank’s Gold and Foreign Exchange Contingency Reserve Account (GFECRA) that will be used to reduce government’s borrowing requirements and ease the debt service burden.

This “gift” means that the medium-term gross borrowing requirement will be reduced by R196 billion over the medium term and that in turn will cut the amount allocated to service debt, allowing more funds to be used for other purposes.

The gift was negotiated with the SA Reserve Bank governor Lesetja Kganyago, who, when he was describing the history of the GFECRA, noted that he had been on the other side of the table, when he was the director-general of Treasury before he became SARB governor.

Kganyago said that one could not spend paper profits so either the profits had to be realised or a new liability had to be created.

In order to ensure that the framework remained in place well after either the finance minister or SARB governor were replaced, the agreement had to be legislated, which would be done later in the day when a new Bill would be introduced to Parliament to ensure a lasting legacy.

In a similar vein, Godongwana said there remained work ahead in terms of negotiating a fiscal anchor, but he did not want to pre-empt any consultation.

Kganyago entered into the mood of the exchanges between the media and the panel members when he chose to split hairs about whether the SARB was being too conservative as more of the GFECRA could have been transferred to the National Treasury.

“We are not being conservative. Rather, we are being prudent,” Kganyago said.

That prudent stance was echoed by the new Treasury director-general, Dr Duncan Pieterse, who said National Treasury was in almost continuous negotiation with multilateral development finance institutions to tap concessional loans that would advance the Just Energy Transition Investment Plan.

“We are always looking to reduce our funding costs, so we look to tap concessional finance, whether from the BRICS New Development Bank or the World Bank,” Pieterse said.

The Budget Review stated that government will continue to explore financing instruments that offer concessional loan terms to support its developmental objectives, including implementation of the Just Energy Transition Investment Plan.

In 2024/25, the equivalent of $2 billion (R38bn) will be raised from international institutions and $9.5bn over the next two years.