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Budget 2024: No silver lining on South Africa’s dark fiscal cloud

Today’s Budget Speech proves that South Africa is in deep trouble with a growing budget deficit requiring more government debt to finance it.

This is surely the most disturbing budget tabled in the last thirty years. It appears that the ANC has realised it is on its way out and it no longer cares about how deep in the quagmire it leaves the country.

One of the most disturbing aspects of the budget is that it is accompanied by a bill which aims to take R100 billion from the Gold and Foreign Exchange Contingency Reserve Account to supplement the budget deficit.

This is extremely problematic. A government that no longer plans for future contingencies has already failed.

Although there is no increase in personal income tax, much-needed relief is not offered either. The customary adjustment to the tax bracket and medical aid credits will not be made this year.

So, in reality, people who pay personal income tax will be worse off.

It may increase state revenue in the short term, but it will do nothing to stimulate economic growth in the long term. Taxpayers are becoming impoverished while the tax base keeps shrinking.

Government debt for the 2023/24 financial year is R84 billion (nearly 18%) more than what was originally projected and currently stands at R470 billion. The budget deficit for 2024/25 is an estimated R320,9 billion.

Overall government debt for 2024/25 is expected to climb to R5,5 trillion with financing costs amounting to an estimated R380 billion, which is more than a billion rand per day.

On top of that, government’s wage bill amounts to R754 billion of the total budget of R2,37 trillion.

When it comes to infrastructure development, the Minister’s actions demonstrate that he is only paying lip service.

While he is talking about infrastructure spending, one of the bills he tabled today aims to take R70 million away from Public Works and Infrastructure in the 2023/24 financial year and allocate it to the Presidency.

The weak economic growth rate proves that there is no silver lining on the dark fiscal cloud hanging over South Africa. The National Treasury’s (NT) projected economic growth rate for the next two years is a mere 1,6%.

In addition, the Treasury has the nasty habit of overestimating the growth rate every year . None of this points to any relief in the near future, but serves as proof that the ANC’s policy directions are failing to unlock opportunities and grow the economy.

The universal minimum corporate tax rate which will be introduced over the next few years will be detrimental to business’s growth and erode investor confidence.

A tax rate of 15% will be imposed on multi-national businesses with an annual revenue of more than €750 million (R15,241 billion), regardless of whether those profits were generated in South Africa or not.

It will result in an exodus of international companies that have invested in the country.

There is only one way in which every South African can get off this runaway train of debt and decline, and that is to get rid of the ANC at the polls in May.

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