Cape Town — DUE to the commodities boom and good corporate tax collection, South Africa’s debt is expected to stabilise at 70% of the current GDP in 2022/23, higher that expected.
This was announced in the Medium-Term Budget Policy Statement (MTBPS) on Wednesday.
“The country’s debt burden remains substantial, having increased sevenfold from R577 billion in 2007/2008 to over R4 trillion in 2021/2022 ... Yet by the end of 2023/2024, revenue will exceed non-interest spending for the first time in 15 years,” said Finance Minister Enoch Godongwana.
“In 2023/2024, a primary budget surplus – revenue exceeding non-interest spending – of 0.7% of GDP is expected. Gross debt is now projected to stabilise at 71.4% of GDP in 2022/2023 – more quickly than previously expected.
“Net government debt will stabilise at 69% of GDP in 2024/2025.”
Godongwana underscored the fact that stable public finances will underpin economic growth.
“(It will) maintain government’s commitment to support vulnerable households and help reduce overall risks to the fiscal outlook. This approach avoids the pitfalls of risky fiscal action that has led to currency depreciation and economic instability in a number of countries.”
When it comes to the main budget expenditure it is, according to the MTBPS, estimated to reach 30.3% of GDP in 2022/23, moderating to 28.3% of GDP by 2025/26.
“This largely reflects fiscal consolidation measures implemented over the past few years, although debt-service costs will continue to rise over the medium term economic framework period,” read the MTBPS documents.
“The main budget deficit is expected to moderate from 4.9% of GDP in the current year to 3.3% of GDP by 2025/2026. A primary budget surplus is projected from 2023/2024 and will increase over the outer two years to ensure debt stabilisation. Compared with the 2022 budget estimates, both metrics have improved.”
Economist at North West University’s business school, Professor Raymond Parsons, described the projections as “good news”.
“South Africa’s public finances have now been put on a much more sustainable basis ... both expenditure and revenue were good-news stories which help to build economic resilience ... the more South Africa is seen to fix its growth problem, the more attractive it becomes for investment,” Parsons said.
“Against the background of difficult global and domestic economic circumstances Godongwana generally delivered a realistic and credible fiscal message in the MTBPS.”
Another economist, Ulrich Joubert said that the MTBPS was “easy to read” and “had a lot of great news”.
The South African Institute of Race Relations (IRR) also welcomed the mini-budget.
“This appears to respond to the IRR’s call on Minister Godongwana to use his MTBPS to signal to organs of state his support for value for money in public procurement,” said the IRR’s Gabriel Crouse.
The EFF, in turn, said said it is was not “shocked” by the “underwhelming and misdirected” MTBPS.
“The so-called clear and stable macroeconomic framework is merely a fool's errand while the aggressive pursuit of privatisation of strategic SOEs disguised as structural reforms is destroying state capacity,” said the EFF’s spokesperson, Sinawo Thambo.
“The greater competition and efficiency choir at the National Treasury, sponsored by the World Bank and International Monetary Fund, that is rushing to privatise energy, ports and essential services such as water and sanitation, is driven by greed and a misguided belief in the corrupt private sector.”
Weekend Argus.