Finance minister Godongwana sounds alarm for SA to get to grips with debt

Finance minister Enoch Godongwana used his department’s budget vote to warn of the rising deficit that the South African fiscus faced, using the occasion to pledge that the National Treasury would work to narrow the deficit significantly in the medium term.

Tabling his budget vote in parliament on Wednesday afternoon, Godongwana said since 2012 public finances have been under strain, with fiscal deficits rising persistently to the point where the debt is more than R5-trillion in the current financial year.

“This debt attracts debt-service costs which are estimated to exceed R380bn this year, and crowd out desperately needed resources for service delivery. For this reason, our fiscal strategy aims to reduce the deficit and stabilise government debt.”

He said the Treasury aimed 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. “The financial outcomes of the 2023/24 financial year suggest we are on track to meet these objectives, and I express my appreciation to the committees of appropriations and finance in both houses of parliament which have supported us in the execution of this strategy.”

Godongwana said the Treasury was implementing an action plan agreement with the Financial Action Task Force to address all of the country’s deficiencies in fighting money laundering and terror financing so South Africa can exit the grey list as early as 2025.

“To support these initiatives, the department has allocated a budget of R31.2m in tax policy sub-programme within the economic policy, tax, financial regulation and research programme. The expenditure incurred in the first quarter of the current financial year amounted to R7m, which constitutes 23% of the allocated budget.”

He said additional allocations to Sars would help rebuild the institution and improve collections while drafting taxation legislation aimed at improving the economic fairness and effectiveness of the tax system.

“The department has a budget of R3.3-trillion over the medium term, of which 57.9% (R1.9-trillion) is for transfers to provincial governments for the provincial equitable share.”

The cabinet has approved budget increases to the provincial equitable share amounting to R101.5bn over the medium-term expenditure framework period for adjustments related to compensation of employees in the education and health sectors, and to Sars amounting to R1bn per year in 2024/25 and 2025/26 to improve tax collection capacity.”

Godongwana said over the medium term, non-compensation areas within the provincial equitable share decreased by R61.5bn as debt-service costs account for an estimated 37.3% or R1.2bn of direct charges against the National Revenue Fund in the period ahead.

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