Neelam Rahim | neelam@radioislam.co.za

3-minute read
01 November 2023 | 12:52 CAT

Minister of Finance Enoch Godongwana. (Photo: Gallo Images / Brenton Geach)

Finance Minister Enoch Godongwana is bound as he reworks South Africa’s budget in the face of lower-than-expected tax revenue and pressure from the ANC to bolster government services ahead of next year’s crunch elections.

Experts are expecting Godongwana to announce cuts in the already hollowed-out provincial budgets in areas of health, education and criminal justice when he presents the minibudget.

National Treasury has already warned that the big tax revenue overruns of the past two years have ended and that the minibudget will unveil cuts to government spending as public finances are in a difficult position.

While a commodity boom previously gave Godongwana some breathing space, recent metal price declines and rail constraints have curtailed the mining industry’s income and contribution to state coffers.

The government is likely to collect R52 billion less tax than projected in February, according to the median estimate of economists surveyed by Bloomberg. They also expect the consolidated budget shortfall to be 5.3% of GDP in the current fiscal year, wider than the national treasury’s projection of 4%.

To balance the books, Godongwana has signalled that he will trim spending and raise borrowing when he delivers his medium-term budget statement in Cape Town on 1 November. Any plans to increase taxes will typically be announced in the main budget in February. All those options will encounter fierce opposition from different quarters.

“The first thing he must say is it’s impossible to continue borrowing money,” said Jannie Rossouw, an economics professor at the University of the Witwatersrand.

“Then he must give us a clear idea of where the reprioritisation would come from, where he will spend more and where he will spend less,” Professor Roussouw added.

One key programme that Godongwana will struggle to cut is the payment of a R350 temporary monthly welfare grant, which was first introduced to cushion the vulnerable during the COVID-19 pandemic.

More than eight million people receive the grant, and there’s a risk of social unrest should it be withdrawn. Two-thirds of 12 economists surveyed expect the stipend to be extended by a year, and the balance sees it being paid indefinitely.

Listen to the full interview on Your World Today with Annisa Essack.