The truth behind South Africa’s ‘two-faced’ budget

 ·29 Feb 2024

Finance minster Enoch Godongwana delivered a “pitch perfect” song and dance to markets during the 2024 Budget Speech, says Efficient Wealth – but the ANC’s manifesto launch just three days later was a completely different tune.

The group said in a note this week that the budget speech was “masterfully orchestrated” to appease markets and capitalists, steering clear of any populist policies, including the likes of the National Health Insurance (NHI) scheme and basic income grants, which were all left to brief mentions or minor allusions.

Instead, the budget set a tone that would appeal to those with an appetite for budget announcements, Efficient Wealth said, painting a picture of reduced spending, easing debt, cutting red tape and even offering minor tax relief where possible.

“The budget rang a perfect pitch in the ears of anyone who believes in market efficiencies – i.e. capitalism. To paraphrase the minister’s capitalist remarks: We are at the end of what is possible with redistribution; we must first increase the size of the economy through prudent management and execution; we must reduce spending; we must spend more efficiently; and so on,” the group said.

The wealth management firm said that the delivery was so good that most budget watchers could be forgiven for almost forgetting the “absolute dismal results” that have been delivered from the same government in charge of the budget for the past 30 years – including a complete lack of accountability and the inability to execute effectively.

“It was, therefore, a masterpiece of political electioneering aimed at a particular crowd: Higher-income households, city dwellers, investors, capital markets, and everyone leaning more right,” Efficient Wealth said.

However, three days later, at the launch of the ANC election manifesto, the tune changed entirely as the politicians changed tack and aimed their promises at a completely different crowd.

“The same ruling party (in charge of the budget) promised to implement prescribed assets for pension funds, establish a sovereign wealth fund, run an expansionary fiscal policy to support growth, consider levying export taxes, and protect certain local industries.

“During other campaigns, there have been promises of homes that will be redistributed, and jobs that will be created. This is much more in tune with what we have come to expect from the ruling party: Socialism, redistribution, and their inability to create sustainable, inclusive economic growth,” the group said.

What stands out amid all these election promises is that all these policies will require higher taxes, much more spending, much less free markets, and much more state intervention, Efficient Wealth said.

“Almost the exact opposite of what we heard during the budget. This was yet another masterpiece of political electioneering, this time aimed at everyone else,” it said.

The group said that this should serve as a warning to anyone under the illusion that the 2024 Budget marked a shift in the direction of the country.

“Nothing has changed in the ruling party and, by implication, for South Africans,” it said.

“For markets, this means that it is more of the same: No growth, a strained rand, and elevated interest rates – until the real change can come, or until the global cycle completely shifts back to emerging markets, somewhere around 2030 to 2035,” it said.

Read: 2024 Budget in a nutshell – the biggest winners and losers

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