Nicola Mawson

Finance Minister Enoch Godongwana yesterday said National Treasury wanted to trim the Budget deficit to 3.4% of gross domestic product (GDP) down from the current 4.9% by the end of the 2026/27 fiscal year.

However, last year’s National Budget indicated that Treasury had set itself the target of narrowing this ratio to 3.3% by the end of the 2024 Medium-Term Expenditure Framework – or 2026/27 – in a bid to address the unsustainably high national debt burden above R5 trillion.

Although the target for trimming the Budget deficit seems to have shifted somewhat, during National Treasury’s Budget vote in Parliament yesterday, Godongwana said the outcomes of the most recent financial year – the 2023/24 financial year – suggested that Treasury was “on-track to meet these objectives”.

“Fiscal deficits rose persistently to such an extent that the level of debt has reached over R5 trillion in the current financial year,” Godongwana warned.

“Through a combination of spending controls and revenue measures, while supporting growth-enhancing measures, we aim to narrow the deficit to 3.4% of GDP by 2026/27 and stabilise the growth of debt-service costs as a percentage of revenue,” he said.

Godongwana said cutting down on the Budget deficit would be achieved through “a combination of spending controls and revenue measures, while supporting growth-enhancing measures”.

He also emphasised that the government has a commitment to reduce debt to save South Africa more than R380 billion a year in interest on debt repayments. Godongwana said the interest on loans was crowding out much-needed resources for service delivery.

“This debt attracts debt-service costs which are estimated to exceed R380 billion this year, crowding out desperately needed resources for service delivery,” the minister said.

“For this reason, our fiscal strategy aims to reduce the deficit and stabilise government debt.”

In a bid to improve fiscal sustainability and stability, National Treasury will continue to implement a “credible fiscal framework to meet government’s revenue requirements, and the promotion of a fair tax system”, Godongwana said.

This, he explained, will mean having to balance declining tax revenue with increasing government expenditure priorities.

“In its efforts to achieve this, the department will continue to provide responsive tax proposals that target improved environmental sustainability, less inequality and more revenue over the period ahead,” Godongwana said.

In this year’s National Budget Review, National Treasury stated that tax revenue slowed in 2023/24 as corporate tax collections contracted by almost 14% over the first 10 months of the financial year compared to the same period in the previous year.

However, the South African Revenue Service (Sars) had collected R54.2bn more than it had the year before.

“As at the end of March, 2024 the South African Revenue Service collected a record gross amount of R2.155 trillion year on year – 4.2% against the nominal GDP of 4.9%,” Sars said in April, last year.

Old Mutual chief economist Johann Els said that while it was too early to make predictions around aspects such as government tax revenue should economic growth pick up, they could be close to or higher than targeted receipts.

Els noted that economic growth could pick up on the back of improved sentiment after the recent elections that led to the Government of National Unity.

Load shedding being halted for more than 100 days should also aid economic growth and drive tax receipts, he said.

National Treasury is also keeping a close eye on expenditure, Els said.

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