Hannah Omarjee | homarjee@kzn.co.za
22 February 2023 | 21:00 PM CAT
3 min read

Photo Credit: WordCraftByAnnisa

All eyes will be on Finance Minister Enoch Godongwana when he delivers his budget speech later today. In a statement, the National Treasury said that Godongwana would deliver the national budget speech trying to balance the national government’s spending priorities and the limited resources on hand. Over the past few years, the budget has been centred on Covid-19. However, a Research Associate at the School of Economics at UCT, Andrew Donaldson, says this year, 2023, the electricity situation is one of the most significant issues on the agenda.

Donaldson says the slow growth of the economy and rising unemployment are still significant economic challenges South Africa faces. South Africa is not yet past the post Covid-19 period. The economy’s growth has yet to fully recover from the hit it took during the lockdown, the slowing down of trade and the disruption it caused to medium and small businesses, which is further worsened by the electricity crisis. The Minister has to present the budget speech in a challenging situation.

Donaldson says that TRANSNET’s poor performance is another infrastructure issue affecting South Africa significantly. He says,” Although we have a bit of a commodity price boom still, the price of coal is high internationally, the commodity industry, the commodity producers, our mining sector can export to reasonable prices, the deterioration in the performance of TRANSNET means that the coal exporters, the manganese exporters are not able to get the volumes of their products to the ports and to the markets that they would like.”

Donaldson believes that TRANSNET has to regenerate its ability to get trains up and to run and send them to the ports for exports to grow and the country’s economy to recover.

Unlike other parts of the world, South Africa is not seeing a declining economy but rather a ‘flat growth’. The medium-term policy statement, released annually in October by the National Treasury, sets the tone for the following budget speech.

Donaldson believes there should not be any big surprises on the spending side of the budget. He says,” You’re seeing a lot of speculation to the press about whether debt of Eskom will be taken over but then also a number of state-owned companies whose balance sheets are in trouble, the Post Office, PRASA, and we may see some financial transfers to Denel or other state-owned companies.”

Last year, the medium-term budget statement aside some money for financial transfers but didn’t elaborate on how it will be used. It is expected that the Minister will discuss this in his speech today.

The medium-term budget statement doesn’t give the details of the tax policy for the budget ahead, so it is unknown what changes are coming.

Donaldson says,” I expect that the Minister will be quite cautious here. This is not a time, with the economy under the sort of stress it is; this is not a time to be raising taxes heavily.” It is speculated that there will be a release on personal income tax with tax increases on alcohol and tobacco. No other significant tax changes are expected.

Listen to the full interview on Sabahul Muslim with host Ml Sulaimaan Ravat and his guest Research Associate at the School of Economics at UCT, Andrew Donaldson.