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2024 Budget in a nutshell: What you need to know | Ep167
#Budget2024 #ANC #SouthAfrica
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2024 Budget in a nutshell – the biggest winners and losers

Finance Minister Enoch Godongwana delivered the 2024 National Budget Speech on Wednesday, 21 February.

The budget touched on many points and topics, including the country’s current economic standing, growth estimates, the massive debt servicing costs, heightened sin tax proposals and the extension of the social relief grant, among others.

South Africa’s economy faces a tipping point, with growth estimates from analysts and researchers pointing downwards.

Continual rolling blackouts are showing little sign of stopping, while port and rail inefficiencies and a high sovereign credit risk remain threats to economic growth in the country, the minister said.

The fiscus

Compared to a year ago, the budget deficit for 2023/24 is estimated to worsen from 4% to 4.9% of GDP.

The higher budget deficit means that debt-service costs in 2023/24 have been revised higher by an additional R15.7 billion to R356 billion.

Debt-service costs will absorb more than 20% of revenue, said Godongwana.

“To put this into perspective, spending on debt-service costs is greater than the respective budgets for social protection, health, or peace and security,” he said.

Debt will now peak at 75.3% of GDP in 2025/26.

For this year’s budget, Godongwana said that the government is staying the course on the fiscal strategy outlined in the 2023 Medium Term Budget Policy Statement (MTBPS) and will achieve a primary budget surplus in 2023/24, with debt stabilising by 2025/26.

“We estimate real GDP growth of 0.6% in 2023. This is down from 0.8% growth estimated during the 2023 MTBPS,” said the minister.

He said the revision is due to weaker-than-expected outcomes in the third quarter of 2023, particularly in household consumption and fixed investment.

He added that growth is projected to average 1.6% between 2024 and 2026.

“The growth outlook is supported by the expected easing of power cuts as new energy projects begin production and as lower inflation supports household consumption and credit extension,” said Godongwana.

Overall, a net reduction of R80.6 billion in non-interest expenditure is being implemented over the medium term.

At the same time, revenue has been revised up by R45.6 billion over the medium-term, relative to 2023 MTBPS.

Here are the biggest winners and losers from the mid-term budget:

Winners

Bond investors

Although South Africa is facing a challenging fiscal situation, the Finance Minister has attempted to stabilise the country’s debt at lower levels than previously estimated.

Godongwana said this would help reduce debt-service costs and the amount the government needs to borrow from investors to fund its spending plans.

Godongwana aims to pull this off by tapping massive paper profits on the country’s gold and foreign exchange reserve account to the tune of R150 billion.

Electric-Vehicle manufacturers

From 1 March 2026, producers of electric vehicles in South Africa will be able to claim 150% of qualifying investment spending to boost the country’s transition to new energy transportation.

Grant recipients

The government has provisionally allocated funding for the social relief grant it started paying the unemployed during the COVID-19 pandemic until March 2027.

Updated increases in social grants are as follows:

The old age grant will go up from R2,085 to R2,185;
The old age grants for those over the age of 75 will increase to R2,205;
Grants for war veterans increase from R2,105 to R2,205;
Disability grants go up to R2,185;
The Foster care grant increases to R1,175;
Care dependency grants rise from R2,085 to R2,185; and
Child support grants go up to R525.

The embattled electricity utility, whose shortcomings cause daily power cuts handicapping the entire economy, will have its government aid cut by R4 billion over two years for failing to sell the Eskom Finance Co. by March 2024 as agreed.

However, Godongwana added that the government would be introducing a new R2 billion conditional grant over the medium term to fund the rollout of smart prepaid meters.
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