Overview of Budget Revisions
Finance Minister Enoch Godwana has tabled his 2024 medium-term budget policy statement (MTBPS) with a few not-so-new policy decisions and a revised economic forecast.
South Africa’s National Treasury has revised its budget projections, forecasting deeper deficits in the budget than anticipated, with larger national debt incurred over the next three years due to lower revenue collection.
The Treasury is now projecting a consolidated budget deficit of 5.0% of GDP for the 2025 fiscal year ending in March, which is an increase of 0,5% from the 4.5% forecast given in February this year.
Early Retirement for Government Employees
The Minister also announced that the government will re-introduce an early retirement programme for government employees in a move that is intended to reduce the grossly bloated government employment costs. Government employees aged between 55 and 59 will now be able to apply for early retirement, without a reduction of pension benefits.
The plan will however cost an additional 11 billion (ZAR) and this amount will be allocated over the next two fiscal budget periods. The cost of the plan will only save the fiscal around 2 Billion ZAR per annum, and so would only be recouped after a six-year period, which appears to fly in the face of the goal of saving costs to the fiscal budget.
The question of government efficiencies is often under the spotlight with recent revelations, alleging that family members of politicians being appointed to positions in the local governments without proper qualifications or experience for the position. The question must be raised, if this is simply another way to get rid of people who should rightfully be fired in a way that provides a golden handshake for them when they leave?
Over the last three decades the government wage bill has almost doubled in its percentage share of South Africa’s Gross Domestic Product, from 5.6% in 1994-95 to 10.4% in 2023. This is a result of the beyond inflation increases to already high remuneration levels and ever flowing bonuses paid to public service employees despite lower levels of service delivery.
Income Revenue – Lower Projections
Income Revenue forecasts have been reduced by a significant 22.3 billion rand (ZAR), partly caused by declining revenue from lower fuel prices as well as lower than budgeted import duties and VAT collection.
Gross national government debt is anticipated to level off at 75.5% of GDP by the end of the 2025/26 financial year, which is marginally up from previous projections.
Economic growth is expected to improve marginally, with a projected growth of 1.1% in 2024 and 1.7% in 2025.
The revised budget numbers had a negative impact on the local currency with the Rand currently trading at R17.70 to the US dollar level, after trading around the R17.60 level this morning.