Godongwana tells South Africa to hold on
National Treasury is attempting to ease tensions and call for calm amid rising panic about South Africa’s precarious financial situation.
In separate responses to parliamentary queries this past week, finance minister Enoch Godongwana said the nation should hold on for the Mid-Term Budget Policy Statement (MTBPS) to be presented on 1 November 2023 to hear the government’s plans to tackle the situation.
In the meantime, he said that the government and National Treasury are fully aware of the financial situation and that plans are in place to mitigate the problems.
Specifically, he said that the growing hole in the budget – while not ideal – was not outside the realm of possibility and was factored into Treasury’s downside projections at the time of the February budget.
The country is set to hit a budget deficit of close to R300 billion by the end of the financial year, driven by lower tax collections and much higher than expected spending by the government – largely as a result of the 7.5% increase granted to public sector workers.
This has led to the guidelines and recommended measures being sent to government departments by Treasury over the past month to cut back on spending. These measures, Godongwana said, are in line with processes that have been underway since before the budget.
“In June 2023 the National Treasury published budgeting guidelines for the MTEF, indicating clearly that savings, reprioritizations and an extension of fiscal consolidation measures would be required.
“Therefore, there has been advice and requests to accounting officers for greater spending control for some time,” he said.
Godongwana added that the Treasury made it clear before the budget that adverse wage agreements would lead to measures being taken to claw back the costs to maintain the stability of the fiscal balance.
“The national budget process has also consistently taken this into account,” he said.
Godongwana conceded that the economic growth outlook for South Africa has worsened significantly relative to expectations outlined in the 2023 Budget, given the impact of more intense load shedding and freight and port logistical constraints, amongst other factors.
“The fiscal challenges in 2023/24 mainly originate from lower-than-expected tax revenue collections for the first four months of the year and tighter financial conditions that have constrained government’s borrowing programme and led to higher borrowing costs.
“These developments happened after the Budget and after 2023 public-service wage agreement was signed in March 2023.”
However, he stressed that both the budget and the 2022 MTBPS outlined the government’s economic and fiscal forecasts, together with scenarios for both a potential upside and a potential downside outcome.
“In addition, the National Treasury publishes a fiscal risk statement in which it outlines the risks that, should they materialize, will affect the baseline economic forecasts and fiscal projections and thus
potentially produce a different outcome.
“The National Treasury’s growth estimates still remain broadly credible,” he said.
“Over the medium term, the fiscal strategy aims to achieve fiscal sustainability by reducing the budget deficit and stabilizing the debt-to-GDP ratio.
“Further details on any adjustments or additions to the strategy will be deliberated within the government and released in the 2023 MTBPS,” he said.
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