Budget: Godongwana projects economy to grow by 1.6% backed by easing power cuts

Minister of Finance Enoch Godongwana. Photograph: Phando Jikelo/ Independent Newspapers.

Minister of Finance Enoch Godongwana. Photograph: Phando Jikelo/ Independent Newspapers.

Published Feb 21, 2024


South Africa’s Minister of Finance, Enoch Godongwana, delivered his budget speech to the nation in parliament on Wednesday.

The minister spoke about global and domestic growth in his speech.

He said, “Global growth is forecast to increase, from 3.1% this year to 3.2% in 2025. The moderate improvement is due to growth in the United States and several large emerging economies. There are downside risks from potential spikes in the global oil price, if the conflict in the Middle East escalates and if growth falters in China – the country’s largest trade partner.”

Locally, the minister went on to say that despite the improved global outlook for 2024, South Africa’s near-term growth remained hamstrung by lower commodity prices and structural constraints.

“We estimate real GDP growth of 0.6% in 2023. This is down from 0.8% growth estimated during the 2023 MTBPS. The revision is due to weaker-than-expected outcomes in the third quarter of 2023, particularly in household consumption and fixed investment. Between 2024 and 2026, growth is projected to average 1.6%. The growth outlook is supported by the expected easing of power cuts as new energy projects begin production, and as lower inflation supports household consumption and credit extension. But, there are also risks to the domestic outlook. These include persistent constraints in electricity supply, freight rail and ports; and a high sovereign credit risk. Our challenge, honourable members, is that the size of the pie is not growing fast enough to meet our developmental needs,” Godongwana said.

The minister further announced, “As such, our fiscal strategy supports economic growth and reduces risks to the economy while ensuring fiscal sustainability. Compared to a year ago, the budget deficit for 2023/24 is estimated to worsen from 4% to 4.9% of GDP. The higher budget deficit means that debt-service costs in 2023/24 have been revised higher, by R15.7 billion to R356 billion. Debt-service costs will absorb more than 20% of revenue. To put this into perspective, spending on debt-service costs is greater than the respective budgets of social protection, health, or peace and security. For this reason, we are strengthening our strategy and sticking to our fiscal goals.”