Business Maverick


Finance Minister Godongwana’s juggle to sidestep tax hikes in an election year — and balance the government books

Finance Minister Godongwana’s juggle to sidestep tax hikes in an election year — and balance the government books
Finance Minister Enoch Godongwana ahead of presenting his 2024 Budget speech at the Cape Town City Hall on 21 February 2024. (Photo: Brenton Geach/Gallo Images)

Enoch Godongwana says the pursuit of socioeconomic justice and shared prosperity is ‘a journey, rather than a destination’. He is dipping into the Reserve Bank’s gold and forex contingency reserve account to push down government debt without taxes hikes — and to keep social wage commitments in the R2.37-trillion budget for 2024.

“For the first time there was almost unanimity (in Cabinet),” said Finance Minister Enoch Godongwana, on the sidelines of the traditional briefing to journalists before tabling the budget in the House. 

Over the next three years, R150-billion will be drawn from the Gold and Foreign Exchange Contingency Reserve Account (GFECRA), once a proposed settlement agreement between National Treasury and the South African Reserve Bank (SARB) is finalised. The necessary legislation, the GFECRA Defrayment Bill, was tabled on Wednesday 21 February, alongside Budget 2024. 

The Sarb holds these funds, currently just more than R500-billion, for the National Treasury. The last time the government accessed these was in 2003 when R28-billion was deposited, according to the Budget Review.

Sarb Governor Lesetja Kganyago told journalists that such GFECRA transactions would not be ad hoc, but part of a new framework that would permit such release of funds only towards the end of the financial year.

Read more in Daily Maverick: No major tax shocks expected in Enoch Godongwana’s Budget speech

Getting debts reduced is key — 21 cents in every rand goes towards paying off debt.

It’s part of government’s priorities to grow the economy and jobs, and to ensure more money for core services and the social wage, according to Godongwana. 

In 2024 debt interest payments at R382.2-billion are the second largest expenditure, after the R387.3-billion for social development. Basic Education is allocated R324.5-billion and Health R271.9-billion for the 2024/25 financial year.

Deficit in 2023 to 2024 

While the deficit in 2023 stood at 4.9%, by 2025 it’s expected to decrease to 4.5% and then by 2027 to 3.3%. It’s the impact of the R150-billion GFECRA funds, which is also expected to decrease gross domestic product (GDP) to debt ratio 75.3%, better than the 77% from the 2023 Medium-Term Budget Policy Statement.  

That all sounds technical, but is important because of the economic tough times, which meant South Africa’s economy only grew 0.6% in 2023 — and is expected to grow 1.3% for 2024. This comes in the wake of increased joblessness, or 41.1% on the expanded definition that includes those too discouraged to even try to find work. 

Read more in Daily Maverick: Budget 2024 live updates

No State-owned Entity is getting a bailout. But the Budget Review notes SOEs are the biggest risk to South Africa’s economy due to “weak governance, financial strain and poor operational performance”. While freight, rail and port logistics are red-flagged, discussions with Transnet continue.

Tax bracket creep 

Debt done and dusted, tax bracket creep must help offset the R15-billion the national coffers were short of largely due to weakened tax collection, given the harsh economic circumstances. Still, R1.86-trillion taxes were collected. 

That means no inflation relief on personal income tax, nor for medical tax credits. While hard-pressed consumers would balk at getting no inflation-related tax relief, this is eased by no hikes on fuel or on the Road Accident Fund levies that are paid on every litre of petrol. 

Drinkers and smokers, as every year, will have to cough up more — significantly more — as the so-called sin taxes are hiked to between an above-inflation 6.7% to 7.2%. 

Pay more sin taxes

In rands and cents that means 47 cents more for a 750ml bottle of fortified wine, 89 cents more for a bottle of bubbly, and 14 cents more for a 350ml can of cider or beer. A packet of cigarettes will cost an extra 97 cents, pipe tobacco 57 cents more for every 25 grams, and vaping liquid 14 cents more per millilitre. 

A further R8-billion is expected to be raised from the global minimum tax rules linked to the Organization for Economic Cooperation and Development (OECD). Effectively, it’s a top-up tax to ensure multinationals pay 15%.

Social wage at 60,2%

Amid sharp criticism from within the governing ANC alliance partners — labour federation Cosatu and the South African Communist Party — over the persistent macro-economic focus, rather than a socio-economic spending focus, the 2024 Budget drives home that 60.2% is spent on the social wage.This includes basic and tertiary education, health, subsidised housing, basic services and the grants paid to some 18-million South Africans. 

The R350 monthly Social Relief of Distress grant continues to be paid to March 2025, with R35-billion from the national coffers. During 2024 the state pension increases a total of R100 in two instalments, in April and October, to reach R2,185 a month; the same as the disability grant and care dependency grant. War veterans’ grants rise to R2,205. The foster care grant and the child support grant increase only in April by R50 and R20, to R1,180 and R530 respectively. 

Government’s infrastructure focus — R943-billion over the next three years — is supported by a new implementation support agency linked to the Development Bank of Southern Africa.  

Power cuts = drooping growth

Rotational power cuts are cited by National Treasury as the leading cause of drooping economic growth; no new support measures are announced in the 2024 Budget. While business relief continues for another year, 31 March 2024 ends the household rooftop solar incentives.

However, the impact of last year’s rooftop solar incentives and that of the embedded private power generation are apparent — 5,200MW of rooftop solar have been added, alongside 6,000MW in embedded power generation projects estimated at R100-billion in value, according to the budget documentation. 

Eskom gets a leg up to deal with municipal debt, a R2-billion grant is available to roll out prepaid metres. By December 2023, 72 defaulting councils had applied for debt repayment arrangements covering around 96% of what’s owed to Eskom. 

On the job front, R7.4-billion goes to the presidential employment stimulus that’s placed 1.7 milllion people in various work opportunities, including classroom assistants. Another R650-million is allocated to the Cities Public Employment Programme.

Policing gets more money — R124.8-billion in 2024 — and the detective service is the biggest beneficiary with a 20% funding increase, albeit from a low base, to R22.5-billion. 

According to the Estimates of National Expenditure, VIP protection for the president, ex-presidents and their deputies and visiting dignitaries gobbles up just more than half the protection services’ R4.09-billion allocation. The troubled crime intelligence accused of financial and other mismanagement is allocated R4.7-billion, most of which is channelled to producing information and analysis; R1.95-billion is for operations.

Cash and equipment-strapped Defence remains on tough terms, R51.8-billion. However, R1.9-billion is moved from administration to maintenance, according to the Estimates of National Expenditure. 

The National Prosecuting Authority (NPA) is allocated R5.8-billion from the Justice budget of R23-billion. The Investigative Directorate that is pursuing State Capture cases — 34 are enrolled to date — is allocated R310-million. But over the next three years a total of R627.8-million is allocated for these State Capture prosecutions, split between the NPA, lower courts and the state legal advisors.

R1.3bn for NHI

On the health front, R1.3-billion is allocated for the National Health Insurance (NHI), aimed at capacity building, including health facility improvements, and preparatory work. “If enacted, it will have significant implications for the funding and organisation of health care in South Africa,” says the Estimates of National Expenditure. Litigation is expected to unfold if President Cyril Ramaphosa signs the controversial NHI Bill into law. 

The Presidency is allocated R612.2-million, while Parliament gets R2.7-billion, and an additional R492-million to pay legislators.

Godongwana, in his prepared speech, cautioned against either blind optimism or crippling pessimism. 

“We should resist both these extremes. Rather we should heed the words of our first democratic president, Nelson Mandela, who more than most saw that the pursuit of socioeconomic justice and shared prosperity is a journey, rather than a destination.” DM


Comments - Please in order to comment.

  • D E says:

    612 billion? surely million


    I would be interested to know what portion of the budget went to interest payments 10 years ago. That really is the crucial number. The so called crowding out of other budget items by higher interest costs. This is something that the advocates of continued increase of the defecit (many of them vocal as colomnists on the pages of DM) never seems to understand. Each year of a deficit means that interest cost will consume an ever increasing share of the pie in the future. A return to higher global interest rates also means that even to maintain our existing pile of debt will become more expensive.

    Selling our gold reserves is really like going to the pawnshop with your the Rolex you inherited from your dad to repay your credit cards

  • Johan Buys says:

    We don’t have NHI. What is NHI going to do with that R1,200,000,000?

  • Johan Buys says:

    Ten years ago, interest on debt was 9% of total budget. Today it is 21% of total budget. Our problem is debt to fund public service salaries. What will interest ratio be in 2029? Government won’t retrench, so we need to freeze hiring and let retirement and deaths do their thing.

  • Brad John says:

    2.37 trillion for them to steal. Now they’re dipping into the contingency fund so that they can steal even more. There’ll soon be nothing left to loot and it will all come crashing down. Then they can blame Whites, capitalism, The West, colonialism, racism and everything else but themselves.

Please peer review 3 community comments before your comment can be posted


This article is free to read.

Sign up for free or sign in to continue reading.

Unlike our competitors, we don’t force you to pay to read the news but we do need your email address to make your experience better.

Nearly there! Create a password to finish signing up with us:

Please enter your password or get a sign in link if you’ve forgotten

Open Sesame! Thanks for signing up.

We would like our readers to start paying for Daily Maverick...

…but we are not going to force you to. Over 10 million users come to us each month for the news. We have not put it behind a paywall because the truth should not be a luxury.

Instead we ask our readers who can afford to contribute, even a small amount each month, to do so.

If you appreciate it and want to see us keep going then please consider contributing whatever you can.

Support Daily Maverick→
Payment options