Highlights from Godongwana’s Midterm Budget 2023

Headlines at a Glance:

  1. Economic growth at 0.9% even with power hiccups.
  2. A gloomy economic forecast for the midterm.
  3. Skyrocketing government debt.
  4. Eskom’s new debt relief measures.
  5. Some fiscal boosts in key sectors.
  6. Tax collections hit a slump.
  7. The costly inefficiency of Transnet.

Weathering the Power Storm: A Glimmer of Growth Finance Minister Enoch Godongwana gave a nod to the resilience of the nation’s economy, noting it grew by a modest 0.9% even amidst the most intense load shedding seasons we’ve seen. Quite a feat!

Looking Through the Economic Telescope: Godongwana didn’t sugarcoat things. As he put it:

“The economic outlook over the medium term remains weak, reflecting the cumulative effect of power cuts, the poor performance of the logistics sector, high inflation, rising borrowing costs, and a weaker global environment.”

A Deep Dive into the Debt Pool:

  • The aftermath of the 2008 global crisis still haunts our fiscal landscape. With government spending continuously surpassing revenue, the alarm bells are ringing louder.
  • Hold onto your hats folks: we’re looking at borrowing averages of R553 billion yearly over the midterm.
  • The debt meter? It’s ticking up—from R4.8 trillion in 2023/24 to a whopping R6 trillion by 2025/26.
  • And here’s the kicker: just the interest on this debt for next year hovers around R385.9 billion. That’s a R1.3 trillion interest bill over the MTEF.
Also Read:   Load Shedding Cracks South African Business Landscape as Liquidations Mount

The Eskom Saga Continues:

  • Today’s Eskom Debt Relief Amendment Bill brings some hope. It sharpens the teeth of the debt relief agreement conditions.
  • The amendment stresses: Eskom needs to pay interest on debt relief loan amounts. Any violation of National Treasury terms means slashing available debt relief.
  • The Finance Minister stressed on the past errors with bailouts, suggesting that strict measures are in place to prevent history from repeating.

Some Rays of Hope:

  1. Prioritising People-Centric Departments: The government’s tossing a financial lifeline to vital departments like Health, Education, and Police Services. With a R24 billion boost this year and a further R74 billion over the midterm, they’re addressing the wage increment for 2023/24.
  2. Covid-19 Relief & Disaster Funds: A R34 billion allocation to extend the SRD Grant and an additional R1.6 billion for disaster relief, notably for flood-ravaged provinces.

The Shadows Cast:

  1. Tax Troubles: We’re missing our tax goals. Revenue collection is set to be R56.8 billion shy of 2023 estimates, and a staggering R121.4 billion short from 2024 to 2026.
  2. Eskom’s Municipality Debts: Out of 67 applications by municipalities for Eskom’s debt relief, they total a hefty R56.8 billion—that’s 97% of what’s owed to Eskom as of March 2023.

Logistics Lament: The Cost of Inefficiency

  • The rail sector’s underperformance cost us big in 2022. We’re talking up to 5% of GDP, or a painful R50 billion hit in the minerals sector.
  • The Minister emphasized,

“No modern economy can thrive and grow new industries if rail lines are beset by delays, and ports are unable to efficiently handle incoming and outgoing cargo.”

In wrapping up, the midterm budget of 2023 paints a mixed portrait of resilience and challenges. It’s a call to action for more sustainable financial strategies and to rally behind the sectors that directly impact the populace. With the road ahead paved with both opportunities and potholes, steering the economic ship demands innovation, caution, and collective commitment.