As the lead up to the National Budget Speech several financial institutions have made some predictions of what Finance Minister Enoch Godongwana will say and implement. Picture: Jairus Mmutle/GCIS
Finance Minister Enoch Godongwana will outline all the financial, economic, and social commitments that government will prioritise in the National Budget Speech on February 21.
This is expected to be a watershed moment for the minister as the country faces a challenging economic and socio-political environment ahead of the national elections later this year.
Anchor Capital said it forecasts economic growth for 2024 at 1% year-on-year (YoY).
This aligns with Godongwana’s Medium Term Budget Policy Statement (MTBPS) that was tabled in November 2023.
Casey Sprake, Investment Analyst at Anchor Capital said the MTBPS’s growth forecast for 2025 of 1.6% YoY would likely prove too strong, given persistent load shedding and the many structural issues currently hampering the South African economy.
“SA’s many infrastructure challenges, deteriorating municipal service delivery and reports of a rising crime rate are further weighing on confidence,” Sprake said.
“In the years ahead, achieving sustainably stronger economic growth will depend partly on SA’s ability to design and implement reforms that lift confidence and investment.”
The financial institution argues that growth for 2025 would be at around 1.6% and there would be an average growth rate of 1.5% per annum until 2027.
The minister is unlikely to introduce any new, significant populist policies or spending measures before the election, Sprake said .
She predicted that Godongwana would earmark R252 billion for the 27 million social grant recipients and would advance the National Health Insurance (NHI) scheme.
Treasury will most likely maintain its commitment to fiscal consolidation, which entails taking a firm stance on further financial assistance to State-Owned Enterprises (SOEs), she said.
“Specifically, we do not foresee additional financial injections for entities like Transnet or Eskom in the upcoming budget,” Sprake said.
PricewaterhouseCoopers (PwC) this week warned that financially-constrained consumers had to brace for even higher cost of living as Godongwana looked likely to opt to hike value-added tax (VAT) slightly.
PwC South Africa tax policy leader, Kyle Mandy said that to raise an additional R15 billion in tax revenues would require either increasing the corporate income tax (CIT) rate by 1.4% to 28.4%, increasing personal income tax (PIT) rates by 0.5% across all tax bands, or increasing the VAT rate by 0.5% to 15.5%.
Mandy said that although Godongwana had not given the details of where the R15bn additional tax revenue would be spent, it was likely to accommodate the extension of the R350 Social Relief of Distress (SRD) grant just as the government had increased VAT by 1% to 15% to accommodate the commitment to free higher education.
Anchor Capital has a wish list that they hoped the minister would fulfil. This includes:
– Taking action against those implicated in wrongdoing at the Zondo Commission.
– No budget reduction for the National Prosecuting Authority (NPA) or, the Special Investigating Unit (SIU) to fight rampant corruption.
– A continued demonstration of the government’s intention to follow a path of fiscal consolidation.
– A credible plan that brings debt accumulation under control.
– A demonstration of additional measures to improve the ease of doing business in SA.
– A credible turnaround plan for Transnet
– Detailed plans to address the financial distress of municipalities nationwide.
– Clarity around the proposed NHI.
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