Business asks for a prudent Budget and bailouts for SOE’s that are under water

The Minister of Finance, Mr Enoch Godongwana.

The Minister of Finance, Mr Enoch Godongwana.

Published Feb 20, 2024


The business sector wants Minister of Finance Enoch Godongwana to table a prudent Budget Review tomorrow amidst continued deterioration of the fiscal position, which has damped investor sentiment.

Business Leadership South Africa (BLSA) yesterday said there were four key things that business was looking for in the Budget: a primary surplus, infrastructure investment, bailouts to troubled SOEs, and changes to tax rates.

BLSA CEO Busi Mavuso said even though there has been a clear effort to rein in spending, economic growth has consistently disappointed.

Mavuso said the revenue side has not been able to deliver enough money to fully restore government finances due to a number of bottlenecks such as the Covid-19 lockdowns, load shedding and the logistics crisis.

As a result, the time at which revenue will exceed expenses before interest payments, the so-called primary surplus, has consistently drifted outward, while gross debt as a percentage of gross domestic product (GDP) has continued moving upward.

“It was meant to happen in the fiscal year ending now, but with revenue under pressure there are doubts it will succeed. If it does not, eyes will turn to whether it can in the year ahead, requiring clear spending discipline.

“Finance Minister Enoch Godongwana must make the case that Treasury will succeed, despite the myriad spending pressures it faces, especially in an election year.”

Mavuso said another important issue that business will be watching for was the government’s efforts to drive infrastructure investment.

She said public spending in particular has continued to decline throughout the period, while the private sector has been picking up the slack, and that was largely a result of the financial collapse of Eskom and Transnet, but core public sector investment has also been weak.

“So, while spending needs to be constrained, if we want to turn the trajectory of overall GDP growth, it is important that we invest in our economic capacity and ensure the state can provide essential services like water and roads,” she said.

“Treasury has been working on reforming the regulations for public-private partnerships to make them easier to use. This process has been going on for some time, and it would be good to see clear announcements of changes to the regulations in the Budget.

“This would enable the private sector to become much more active in investing in public infrastructure, without putting government finances under strain.”

Business will also be watching for changes to tax rates as Godongwana in November said he would announce additional tax measures to raise R15 billion for the fiscus.

Increasing taxes may seem to be one way to restore government finances, and economists have been speculating that he would probably raise the value-added tax (VAT).

However, Mavuso said VAT was a regressive tax that affects the poor the most and she can’t see that happening in an election year.

“I think it is important to temper expectations of what the Budget can do. Gone are the days when National Treasury simultaneously held the levers of key policy interventions to support growth, as well as the levers of government spending,” she said.

Meanwhile, Tourism Business Council of SA CEO Tshifhiwa Tshivhengwa said they wanted to see tourism and provincial authorities getting the financial means to promote the destination because the return on this investment is far greater.

“We need to do is to make sure that the local municipalities who are responsible for the roads that lead to the attractions, are given enough money and capacity to make sure that those roads are clean, they don't have too many potholes, and also to ensure that we're able to send as many people as possible to support those attractions and the communities that are around those attractions,” Tshivhengwa said.

“Also, the issue around safety and security. It's very important. Every tourist wants to go to a destination. They want to return home safely. So we implore the minister to put more emphasis on safety and security, for both South Africans and foreign nationals that travel our country for tourism purposes.”