Finance Minister Enoch Godongwana will have to walk a tightrope when he tables the 2023 medium-term budget policy statement (MTBPS) as revenue remains behind budget, expenditure was exceeding budget, resulting in the need to borrow, according to economists.
He is also facing mounting pressure not to cut public expenditure despite a shortfall in tax revenue as the economy deteriorated since he tabled the budget in February.
Godongwana’s MTBPS will be a mixture of what many expected considering his address at the Kgalema Motlanthe Foundation’s Inclusive Growth Forum at the weekend, said economist Azar Jammine.
“He signalled that he needs to restrict expenditure and at the same time borrow a little more. What we will see is an increase in the budget deficit.
“I am expecting an increase of 5% in the GDP compared to what he presented in February.
“He has not much (space) to manoeuvre. The revenue is behind budget, expenditure is exceeding budget and that results in the need to borrow,” Jammine said, adding that there would be re-prioritisation of programmes.
The National Treasury previously said a shortfall in tax revenue collections estimated at R22 billion for the first five months of 2023.
In August, heads of departments were instructed to implement austerity measures, which was met by an outcry from opposition parties and civil society amid a suggestion that funds were needed to extend the R350 grant after March 2024.
The public sector wage agreement has also been blamed for the fiscal challenges being experienced.
Economist Dawie Roodt said Godongwana will not make major announcements, but noted the revenue generation was under immense pressure.
“He would want to cut here and there, but there will be no significant cuts in expenditure.
“He will indicate where he is to borrow the money. That is very important as he plans to borrow more money,” he said.
Roodt also said Godongwana may indicate whether he would allocate additional funds to some of the state-owned entities.
“Some of the SOEs such as Eskom and Transnet want a lot of money. Maybe the minister will give an indication whether he is to give them, especially Transnet,” he said about the bailouts.
Transnet, which recorded profit loss, has requested a R100 billion to fund its recovery plan.
Both Roodt and Jammine said the government was unlikely to scrap the R350 grant but eventually make it permanent.
“He will simply find the funds. That is very important for politicians,” Roodt said, pointing out that next year there will be elections.
Business Unity South Africa chief executive Cas Coovadia said Godongwana needed to outline clear measures to ensure available funds were spent efficiently and to curtail expenditure.
Coovadia said there should be “deep and substantial cuts in spending on non-essential and non-productive programmes, the shelving of unfunded prestige projects and linking future public sector wage increases to inflation.”
“These measures must have the support of the rest of the Cabinet, which must speak with one voice to boost public confidence in the government’s commitment to responsible management of the economy,” Coovadia said.
He said Godongwana has no choice but to raise more debt as a stop-gap measure to fund capital investment in growth-enhancing economic infrastructure.
IFP MP Mzamo Buthelezi warned Godongwana not to deliver an “election-friendly miracle budget” ahead of the 2024 elections.
“The fundamentals of this budget must address the fact that South Africans are unable to put food on the table as the cost of living is steadily increasing.
Social relief would assist the most vulnerable,” Buthelezi said.
ACDP chief whip Steve Swart said Godongwana needed to carefully balance possible solutions to the fiscal crisis, including cutting back on expenditure and increasing borrowing.
“The ACDP does not support tax increases, given the financially hard pressed situation households and businesses find themselves in,” Swart said.
“The alternative to tax increases is reducing government expenditure.
We believe, however, there are other ways of cutting government expenditure that don’t affect service delivery, such as reducing administrative costs by amalgamating various departments and ministries,” he said.
Good party MP and secretary-general Brett Herron said if the choice, in the short term, was between borrowing or cutting social and infrastructure expenditure, then borrowing should be chosen.
The Federation of Unions of South Africa (FEDUSA) maintained that the public wage bill’s impact on the public purse was not the result of wage increases agreed to by the government and organised labour.
“Fedusa proposes that the government must reduce the bloated cabinet size for the channelling of funding towards the filling of vacancies in government for improved services,” the labour federation said.
The Public Servants Association said it did not agree that the curtailment of government expenditure was the magic solution for the economic problems.
Cape Times