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Eugene Msizi Buthelezi
Eugene Msizi Buthelezi, nGAP Lecturer in the Department of Economics and Finance, University of the Free State.

Opinion article by Eugene Msizi Buthelezi, nGAP Lecturer in the Department of Economics and Finance, University of the Free State. 


Finance Minister Enoch Godongwana delivered the 2024 National Budget Speech on Wednesday 21 February 2024. The speech centred around promoting economic growth, addressing inequality, and ensuring sustainable development in South Africa. Minister Godongwana emphasised the importance of expanding the national pie through economic measures while also focusing on the distribution of resources to achieve social and economic justice. Monetary policy spillover to fiscal policy was evident, as the minister referenced the utilisation of the Gold and Foreign Exchange Contingency Reserve Account (GFECRA). This budget speech came at a time of significant economic challenges in South Africa, including the following:

 

  • Falling economic growth projection, reflecting that there are still persistent challenges in addressing unemployment, poverty, and inequality.
  • Eskom's financial woes and operational inefficiencies, which remain a critical concern.
  • Rising government debt, budget deficits, and debt-service expenses are among current pressing issues.
  • Tax adjustments, which are needed more than ever to bolster government revenue, alongside social grant increases to support vulnerable populations. 
  • Public-private partnerships for economic growth, job creation, and enhanced productivity.

Domestic economy and fiscal outlook 

The growth outlook for South Africa between 2024 and 2026 is expected to average 1,6%, indicating a shortfall of 3,4% from the targeted economic growth of 5% as outlined in the National Development Plan's vision for 2030. This discrepancy reflects the challenges facing the South African economy in addressing issues such as unemployment, poverty, and inequality. Nevertheless, the minister pointed out key policy initiatives in the budget speech. This included the implementation of measures to enhance procurement efficiency and promote local industrialisation. Moreover, structural reform in sectors such as electricity, logistics, water, and telecommunications to stimulate growth.

On the other hand, the elephant in the room – Eskom – remains a significant challenge in the South African economy. Eskom, the state-owned electricity utility, has been plagued by financial difficulties, operational inefficiencies, and power supply constraints, leading to frequent load shedding and disruption of economic activities. However, in the 2024 Budget Speech, Eskom was granted a debt-relief plan to alleviate its financial burden and allow the entity to focus on its core business operations. It was noted that Eskom's coal-fired power stations are being fixed and renewable energy projects are in the pipeline to promote and further enhance energy security. These interventions will ensure operational efficiency, enhance energy security, reduce reliance on fossil fuels, reduce the frequency of load shedding, and minimise disruptions to businesses and households. Despite this, Eskom may still require significant financial investments, potentially increasing the financial burden. Moreover, integrating renewable energy and restructuring Eskom's operations may face resistance or challenges in implementation, leading to transitional disruptions.

In terms of infrastructure, the minister pointed out that partnerships between the public and private sectors to finance projects are key to delivering infrastructure projects. It is expected that infrastructure investment will stimulate economic growth, create jobs, and boost productivity. However, large-scale infrastructure projects carry financial risks, including cost overruns, delays, and potential budget deficits that could strain public finances. Fiscal authorities have shown a lack of monitoring and evaluation, as the public is still awaiting a report on the generation of sustainable employment and infrastructure projects that have contributed to the overall economic growth, which is a point of concern. On the other hand, infrastructure investment may be vulnerable to corruption, mismanagement, and lack of transparency, leading to inefficiencies and suboptimal outcomes. These are some of the aspects that fiscal authorities need to look at and put necessary measures in place to ensure the success of infrastructure projects. Some of the key macroeconomic variables that were highlighted in the budget speech are the following:

  • The national government's debt, which is projected to reach approximately 75,3% of the Gross Domestic Product (GDP) by 2025/26.
  • The budget deficit for 2023/24, which is expected to worsen to 4,9% of the GDP. 
  • The debt-service expenses which are anticipated to increase is now estimated at R356 billion, representing more than 20% of revenue – surpassing the budgets allocated for social protection, health, or peace and security. 

Given the economic challenges reflected in these macroeconomic variables, the minister has indicated that immediate reform will be through the 30% utilisation of the GFECRA, which has grown to more than R500 billion. Therefore, the government plans to use R150 billion from GFECRA, expecting a decline of approximately R30,2 billion in government debt servicing costs over the 2024 Medium Term Expenditure Framework (MTEF). The use of the account is effective, because the account provides liquidity in times of need, allowing the government to meet its financial obligations without resorting to external borrowing. Given that the account resides with monetary authorities in the South African Reserve Bank (SARB), fiscal authorities will find that GFECRA has restrictions on utilisation, limiting the government's flexibility in responding to immediate financial needs or emergencies. Moreover, depending on the size and management of the GFECRA, it could impact market perceptions of the country's financial health and credibility.

Tax and revenue 

The weak performance of the economy has been identified as a significant factor contributing to a sharp decline in tax revenue collection for 2023/24. It has been observed that tax revenue for 2023/24 is R56,1 billion lower than estimated in 2023. The minister highlighted the implementation of a global minimum corporate tax, which is projected to generate R8 billion in corporate tax revenue by 2026/27. Additionally, measures will be taken to target multinational corporations with annual revenue exceeding a certain threshold. General solutions for revenue generation were proposed, which included the following: 

  • Focusing on excise duties for alcohol products, with increases ranging between 6,7% and 7,2% for 2024/25
  • A 4,7% increase in tobacco excise duties on cigarettes. 

Implementing these tax proposals and improving revenue collection will boost government revenue, allowing for the funding of essential services, infrastructure projects, and social programmes. This enhanced revenue generation will also contribute to fiscal stability by reducing budget deficits and public debt levels over time. However, fiscal authorities must prioritise modernising tax administration and combating illicit activities to enhance tax compliance, ensuring that all taxpayers contribute their fair share.

Social security and government spending  

In the budget speech, the minister demonstrated an awareness of the pressing realities confronting South African society by announcing adjustments to social grants in line with inflation. The grant changes included, among others 

  • R50 increase to the foster care grant;
  • Child Support Grant increases from R510 to R530;
  • Older Person’s Grant increases by R90 on 1 April and R10 in October 2024; and
  • COVID-19 Social Relief of Distress Grant of R350.

However, it is crucial to recognise that these increases may still fall short of adequately addressing the needs of those living below the poverty line, especially considering the high levels of unemployment and the rising cost of living. Moreover, while there is a commendable effort to provide support through these grant adjustments, fiscal constraints pose significant limitations. The government must navigate carefully to ensure that these increases are sustainable within the broader fiscal framework. Balancing the imperative to support vulnerable populations with fiscal prudence is a delicate task, requiring careful consideration of both short-term relief measures and long-term fiscal sustainability. Ultimately, while the announced increases in social grants represent a step towards addressing the immediate needs of vulnerable communities, policy makers must continue evaluating and refining these measures to ensure they effectively alleviate poverty and inequality while remaining fiscally responsible. Other critical government spending was pointed out in the budget speech, including the following: 

  • An additional R25,7 billion was allocated to the education sector’s wages.
  • Childhood development grants increased to R2 billion over the medium term.
  • The health sector to be allocated a total of R848 billion over the Medium-Term Expenditure Framework (MTEF) for health.
  • An allocation of R61,4 billion for employment programmes over the medium term.
  • A R7,4 billion for the Presidential Employment Initiative.

The effectiveness of government spending by increasing wages in the education sector is welcome, as it could attract and retain qualified educators. However, it is essential to consider whether these increases are accompanied by measures to address broader challenges within the education system. Simply increasing wages without addressing issues such as inadequate infrastructure, resource shortages, and administrative inefficiencies may limit the overall impact on educational outcomes. To maximise effectiveness, it is crucial for the government to also invest in building new schools, providing resources for the day-to-day running of schools, and implementing reforms to improve the quality of education.

On the other hand, regarding spending on employment programmes and initiatives to address unemployment, effectiveness will depend on fiscal authorities' design and implementation of these programmes. Allocating funds to employment programmes could potentially create job opportunities and reduce unemployment rates, particularly among artisans and recent graduates. However, there is still a need for alignment of employment programmes with the needs of the labour market, the provision of relevant skills training and support services, and the creation of sustainable job opportunities. Additionally, effective monitoring and evaluation mechanisms are essential to ensure that spending on employment programmes yields tangible outcomes.

In conclusion, the 2024 Budget Speech touched upon various critical challenges facing the nation, including economic growth constraints, Eskom's challenges, rising government debt, tax revenue shortfalls, and the need for social security enhancements. The budget speech regained the need to address these challenges effectively and pointed out the importance of ensuring that fiscal policies prioritise equitable distribution of resources and effective management of public finances. Key areas for fiscal policy focus included continued investment in infrastructure projects, coupled with public-private partnerships, which can stimulate economic growth, create jobs, and enhance productivity. It has been noted that enhancing revenue generation through effective tax policies, such as corporate tax reforms and excise duty adjustments, can bolster government revenue. On the other hand, social grant adjustments were deemed to be vital for supporting vulnerable populations, but efforts to address poverty and inequality should extend beyond grant increases. The speech acknowledged that investments in education, health care, and employment programmes are essential to promote inclusive growth and reduce socio-economic disparities.

Did the budget speech address current challenges? Yes, the 2024 Budget Speech addressed many of the current challenges facing South Africa. However, moving forward, fiscal authorities need to prioritise structural reforms, innovation, and inclusive economic development strategies to address South Africa's economic and social challenges effectively. Exploring opportunities for public-private collaboration, leveraging technology for efficient service delivery, and promoting entrepreneurship and small business development can contribute to long-term sustainable growth and prosperity. Additionally, maintaining a conducive policy environment, fostering investor confidence, and strengthening governance and institutional capacity are crucial for achieving lasting economic resilience and social progress.

  • The views presented here are mine, they do not represent the views and policy position of the institution I am affiliated with. I do this for community outreach as a person in academics only.

News Archive

SRC Inauguration speech: 22 January 2005
2005-01-22

Campus Head (Prof Peter Mbati). Dean of Students (Dr Natie Luyt). Deputy Director: Student Affairs and my boss (Mr. Teboho Manchu), Members of the University executive and Academic staff members, SRC members, Leaders of trade Unions and Student organizations, Distinguished guests, Ladies and gentlemen, most importantly first entering students and Parents receive my heartfelt revolutionary greetings.

Let me extend my word of appreciation to our distinguished guests for adding value and dignity to this event. Your presence here means a lot to us. Program Director what I bring here with me, assisted by facts, and is therefore just the work of my imagination. Like a love letter addressed to a sweetheart miles away, even though you do not know how she feels, what she wants to hear, and do not even know how her face looks like.

To me a speech is just an honest and intimate conversation. That is why I got into the habit of establishing a dialogue, or a debate, with my acquaintances looking at their faces and trying to persuade them of what I am telling them.

Mr. Speaker and Madam Deputy Speaker of the Student Parliament we are gathering at this ceremony, significantly few weeks after the release of grade 12 results, with the exception of those from Mpumalanga because of fraud. The Grade 12 results also show that only 18% of Black learners matriculated with exemptions, as compared to 53, 6% of white learners. This is an indication that our education system needs an overhaul.

We are also gathered here significantly a day after the management retreat held in Bloemfontein, Masselspoort. The retreat discussed, among other things, the transformation agenda, and some possible solutions to challenges we are facing now.

Most regrettably, we are gathered here when the whole world morns the victims of Tsunami tragedy. Let me therefore tore the line and convey our deepest condolences, from the last robot of my heart, to the affected families. Our hearts and thoughts will always be occupied by this horrified tragedy.

Creating a new Institution

I would submit, for purposes of debate and discussions that this Institution should strive to specialize and excel in regional rural development studies. Since our higher education, institutions in South Africa are generally weak in rural development studies. Instead, most of them tend to have an urban orientation to their programmes. Training everybody for the cities, big business and the private sector. This is a big weakness in a country with such large rural areas and population trapped in poverty, disease and ignorance.

Women’s studies

Program Director, it is only a moron who can argue against the fact that for us to reposition the institution around the regional development challenge, we need to start first with women empowerment. It is a fact that in most of our poor communities and families, it is women who withstand the worst of poverty. They are the ones who daily have to wipe tears from children who are hungry. It is women who look after the sick, the elderly, those dying from AIDS and the jobless. They are the one who have to fetch water, make fire and cook. There can therefore be no rural development studies without women studies, in particular on how to empower them and assist in the provision of basic services, so that they are relieved from some of the burdensome task of the society.

Registration Process

Mr. Speaker and Madam Deputy Speaker of the Student Parliament let me indicate that the registration is a process and not an event, so it cannot be concluded overnight. This huge process demands for people to stay calm, as there is no crisis. People should stop being excited. At the same time, no organization should use its cheap popularity and unilaterally disrupt the continuous and smooth running of the registration process at hand.

Let me strongly indicate, madam deputy speaker, that I am on record for stating that I have forgiven all those who have wronged us. I harbour no bitterness towards the protagonists of our painful and unfortunate events of the past week. And we will overcome this process not by our own devices but by the help of Almighty God and the grace of our Lord Jesus Christ.

Concerning registration of first years, we have programs, concerning that of senior students, we have programs, regarding graduations we have programs, and concerning HIV\AIDS we have programs. So, there is no need for people to press panicking buttons.

Mr. Speaker and Madam Deputy Speaker of the Student Parliament let me be opportunistic and welcome the entire student body on Campus for the academic year 2005. May our lovely first entering students have a happy and momentous year as part of Qwaqwa Campus of University of the Free State. May your studies be fruitful and enjoyable.

Student years are generally the happiest years of your life, so please make the most of them. While you are doing, all your preparations bear in mind that University is not an opportunity, it is just creating opportunities for a person.

On behalf of SRC members, our people, our students and management members I would like to welcome you all. Even though your parents are far away, here at Uniqwa you have more brothers, more sisters and more parents. Since we will love you with the same love as if we are from one family, and I have no doubts that management members will love and care for you as if you are their own children. Should you encounter any problem while studying at the Qwaqwa Campus of University of the Free State do not hesitate to contact us at the SRC offices because we need to ameliorate any factor influencing you negatively while on campus. I wish you well in the attainment of your academic pursuit.

Senior Students: We are not faced with just a new year but another academic year where we all have to work together to achieve our common goal of building our Institution through the development of human power. I urge you to invest your whole selves in this SRC.

For quite some time now, a debate has been ranging as to, whether has there been any progress in this incorporation process, or we are just moving with no direction. This debate is important, but I hasten to add not essential. The SRC is also involved in this debate, but with definite shift in emphasis. For us it is not important to participate in the debate than it is in finding solutions for the challenges of this new chapter in the history of humankind.

To my colleagues: Comrades, we are leading this Institution with a sense of pride and duty, and I know very well that we lead men and women, students who are determined to ensure that we all reach our destination safely and on time.

I said in one of our meetings that there are more enemies on our way, more than we can imagine. I think you witnessed that during the course of this week. The excitement and unnecessary confusions caused by some confused and loosed charlatans bear testimony to my statements. We should not reveal our game plans unless we are ready to slam.

Let me also borrow from the words of the late Albert Lethuli when he said and I quote: “There remains before us the building of the new land, from the ruins of the old narrow groups, a synthesis of the rich cultural strains which we have inherited. The task is immense”. Lastly, a navy divided within its ranks will be vanquished and destroyed by the enemy, but a navy united in purpose and action, loyalty and commitment will not drawn but sail on to victory.

In conclusion, let me call upon all political structures, church denominations, developmental structures, clubs, societies and forums to put aside all their differences, ideological insinuations and forge unity towards transforming Qwaqwa Campus of University of the Free State into an institution that is seen playing vigilant role in developing students academically, politically, socially, spiritually, religiously, culturally and otherwise.

Program Director, let me end my speech by indicating that every drop of my blood is telling me that Uniqwa is my home. I firstly became a student here, I became an activist here, I became a leader here, I became a president here, I will become a graduant here and hopefully I will become an employee here. So never, doubt my commitment towards the community of this campus.

Please be informed, in a central University of Technology’s way, that if there is no UNIQWA in HEAVEN, then I am not GOING.

Let us broaden the social base.

Tello Titus Wa-Motloung President General

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