Medium term economic outlook remains weak, Godongwana warns

The Minister of Finance, Mr Enoch Godongwana briefing members of the media before tabling the Medium-Term Budget Policy Statement (MTBPS) in Parliament. Picture: Jairus Mmutle/GCIS

The Minister of Finance, Mr Enoch Godongwana briefing members of the media before tabling the Medium-Term Budget Policy Statement (MTBPS) in Parliament. Picture: Jairus Mmutle/GCIS

Published Nov 2, 2023


Cape Town - Lower revenue performance, increased wage bill costs and higher projected debt-service expense have been reflected in the country’s budget deficit that increased by R54.7 billion compared with the 2023 Budget estimates.

Tabling the 2023 medium-term budget policy statement (MTBPS) in the National Assembly, Finance Minister Enoch Godongwana announced that rising annual budget deficits had reached a level where the government would borrow an average of R553bn a year over the medium term.

As a result, gross debt would rise from R4.8 trillion in 2023/24 to R5.2 trillion in the next financial year.

By 2025/26, it would exceed the R6 trillion mark, Godongwana said.

“Over the next three years, debt-service costs as a share of revenue will increase from 20.7% in 2023/24 to 22.1% in 2026/27.

“The cost, or interest of this debt, for next year alone, amounts to around R385.9 billion. Over the medium-term expenditure framework (MTEF), interest costs amount to R1.3 trillion.”

Walking a tightrope yesterday, Godongwana said the economy had not grown fast enough to support increasing expenditure or current debt levels.

“The economic outlook over the medium term remains weak, reflecting the cumulative effect of power cuts, the poor performance of the logistics sector, high inflation, rising borrowing costs, and a weaker global environment.”

The country’s main budget deficit forecast for 2023 also worsened to 4.9% of GDP, compared to the 4% estimated in the February budget. This as spending in the current financial year has been revised down by R21 billion.

Further reductions of R64 billion in 2024/25 and R69 billion in 2025/26 have also been proposed.

Godongwana said the government would allocate funds to sectors that were personnel heavy, including health, education and the police.

Additional funding of R24 billion this year and R74 billion over the medium term would be used to fund the 2023/24 wage increase and the associated carry-through costs in these sectors. A total of R34 billion had been allocated to extend the R350 Covid-19

Social Relief of Distress grant until March 2025, Godongwana announced.

Recognising the impact of weak financial conditions on municipalities, Godongwana said municipalities owed large debts to Eskom.

At the end of October, 67 applications had been submitted for debt-relief for the power utility, totalling R56.8 billion, or 97% of total municipal debt owed to Eskom at end-March 2023.

This comes as Eskom on Tuesday said municipal debt arrears remained a cause for concern as it accumulated to R58.5 billion by March 2023. Eskom also recorded a net loss of R23.9bn, double from the R11.9 billion incurred in 2022. Eskom said the energy availability factor continued to deteriorate, reaching a low of 56.03% from 62.02% in 2022, resulting in 280 days of load shedding. This as unplanned maintenance was at 31.92% compared to 25.35% in 2022.

“Eskom incurred a net loss after tax of R23.9 billion, a significant increase from the R11.9 billion net loss reported for the previous financial year.”

Reacting to the MTBPS, the IFP said escalating debt, increasing cost to service the debt, and the debt-to-GDP ratio were alarming.

“South Africa’s unemployment crisis continues to worsen, and we have heard nothing concrete from the ANCled government on how they plan to create jobs for our struggling citizens.”

DA spokesperson for Finance Dion George said Godongwana had no alternative but to increase borrowing. While Build One South Africa (Bosa) acting spokesperson Roger Solomons said household debt was increasing as net wealth declined.

“Inflation is increasing, which directly impacts bond repayments and rental contracts. The cost of the basic food basket is now R515577.”

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Cape Argus