There is cautious optimism that South Africa’s fiscal picture is improving after finance minister Enoch Godongwana delivered his maiden budget speech on Wednesday.
Godongwana’s comments were broadly in line with market and analyst expectations – but a few snippets of good news emerged through a freeze on fuel levies, and inflation-linked adjustments to most taxes.
“The budget deficit has reduced to 5.7% of GDP rather than the 6.6% anticipated in November 2021’s Medium Term Budget Policy Statement. National Treasury says it remains committed to reducing the fiscal deficit and stabilising debt.” Tax overruns have lifted a weight off of Treasury’s shoulders, and Momentum Investments said that forecasts point to a degree of fiscal discipline.
Jeffery Schultz, senior economist at BNP Paribas said that despite all this, Treasury’s budget and forecast are still erring on the side of conservatism, and lean into growth-generating spending. Public sector employees will continue to receive the monthly non-pensionable cash payment of between R1,200 and R1,700 until negotiations have concluded, the minister said. In a recently published report, the IMF said it did not believe the state would be able to honour its commitment to rein in the public sector wage bill.
“If translated into headcount reductions, between 30,000 and 35,000 jobs could be affected unless further reprioritisation in the budget is assumed,” it said.One of the few surprises in the budget speech was the finance minister’s decision to freeze tax hikes on fuel and the Road Accident Fund levy for the year.
Duvenage said that it is the first year of no increases in the general fuel levy and Road Accident Fund levy on fuel in more than two decades, and could be a sign that the government is paying more attention to calls from civil society in this regard.
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