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22 February 2024 Photo SUPPLIED
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

Association of Former SRC Presidents – first of its kind
2013-08-19

 

Some of the former SRC presidents who attended the inaugural dinner were, from the left: Roelf Meyer, Bloemfontein Campus 1970; Dr More Chakane, Qwaqwa Campus 1990; vice-chairperson of the AFSP; Dr Anchen Laubscher, first woman president of the Bloemfontein Campus 2003; and Prof Voet du Plessis, Bloemfontein Campus 1967/8.
Photo: Stephen Collett
19 August 2013

The University of the Free State (UFS) made history this weekend with the establishment of its Association of Former SRC Presidents (AFSP) – the first association of its kind after the merging and incorporation of public institutions in 2003–2004.

Twenty-two former SRC presidents attended the inaugural dinner to launch the association on Women's Day, Friday 9 August 2013, and recognised especially the attendance of all four female presidents that previously chaired the SRC. Other guests included former rectors and chairpersons of the UFS Council, as well as chairpersons of the Alumni.

The attending presidents served during the period 1967–2012, either at the former University of the Orange Free State (UOFS), the Qwaqwa Campus of the former University of the North, South Campus of the former Vista University and the University of the Free State.

“Your very personal narratives as former student leaders during the troubled past of our history in South Africa matter most as you design the questions for and purpose of an authentic conversation with student leaders today – this will set your association apart from others," said Rudi Buys, Dean of Student Affairs.

Former SRC president of 1975/6 and now founding member and chairperson of the association, Dr Michiel Strauss, said that this is the opportunity for former student leaders to give back to the younger generation.

“It is true that many middle-aged white South Africans have a deep sense of debt and obligation towards the youth of our country. We owe them an apology for the discrepancies of the past. This apology should be more than just words. Deeds of reconciliation and restitution must be seen.

“As for myself; I was president of the SRC of the then UOFS in the same period in which the biggest part of the youth of South Africa suffered so much in their struggle for freedom in our country.

“In my personal capacity, as well as in my official capacity as SRC president, I did nothing to try and understand and/or co-operate in the struggle of my peers. This fact haunts me until this day.

“The question then for people like me and so many others, is: Where do I invest my time and energy and passion for this country? Where will my contribution make a real difference? There is no better answer to this burning question than to invest in the human resources in our beloved South Africa, and more focused – to invest in the young people.

“There is something meaningful and beautiful happening at the UFS and it is now a leader in academic standards, reconciliation, leadership formation and nation building. I can think of no better place to make my small contribution,” Dr Strauss said.

“As former student leaders, we have a sense of purpose to contribute to the university and there is no better time to start than now. It is my privilege to be part of this great initiative and I look forward to what will be achieved,” said Dr More Chakane, deputy chairperson of AFSP and former SRC president of the Uniqwa Campus of the University of the North in 1990 (now the Qwaqwa Campus of the UFS).

Roelf Meyer, known for the prominent role he played in the negotiations to end apartheid in South Africa and chairperson of the Civil Society Initiative (CSI) of South Africa, said his time as a leader at the university has given him the opportunity to apply and use his skills and experience and share it with the new leaders of the institution. "The UFS is highly regarded because of the exceptional standards and excellence portrayed by its senior leadership. Where I can make a difference, I'll do it with pleasure and pride," he said. Meyer served as SRC president in 1970.

The association met on Saturday 10 August 2013 to adopt its interim constitution and consider operational matters, while also reaching agreement on its core functions in support of its purpose to transfer change leadership skills to incumbent student leaders and mediate meaningful contributions of Alumni to the growth of the university.

“We greatly value the declared intention of AFSP to work with the university to design meaningful and sustainable mentorship programmes to support and guide student leaders on campus, and have pledged our support in this regard,” said Buys.

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