South Ahh, It’s time to tighten our belts again. This afternoon, Finance Minister Enoch Godongwana delivered the 2024 Budget Speech. This is the last budget of the sixth democratic administration, and while there have been gains, they’re not much.
He started the speech by reflecting on the economic and political imperative of redistributing the national pie to address inequality and deprivation in South Africa. “The budgets we have tabled since 1994 have been about securing the goal of growing the economy so that we can do more to address the inequalities and deprivation that still scar our society and undermine the promise of democracy,” said Godongwana.
We take a look at five points highlighted in the speech:
- Our Economic Outlook
Due to lower commodity prices and structural constraints, South Africa’s growth potential looks bleak. Real GDP growth for 2023 is estimated at 0.6%, down from the previous estimate of 0.8%. Godongwana said: “We estimate real GDP growth of 0.6 per cent in 2023. This is down from the 0.8 per cent growth estimated during the 2023 MTBPS. The revision is due to weaker-than-expected outcomes in the third quarter of 2023, particularly in household consumption and fixed investment.”
- Our Debt:
The budget deficit for 2023/24 is expected to increase from 4% to 4.9% of GDP, with debt-service costs rising to R356 billion. The government aims to reduce non-interest expenditure by R80.6 billion over the medium term and has raised revenue by R45.6 billion compared to previous estimates.
The minister also announced a reform of the Gold and Foreign Exchange Contingency Reserve Account (GFECRA), which tracks gains and losses on the country’s foreign currency reserves. This reform will help reduce government borrowing and strengthen the Reserve Bank’s financial position.
There are plans to draw down R150 billion from the GFECRA balance once enough buffers are in place to manage exchange rate fluctuations and protect the Reserve Bank’s solvency.
- Sin Tax
You should stock up on your favourite vices. Godongwana’s speech highlighted that proposed excise duty increases for alcohol in 2024/25 are between 6.7% and 7.2%. This means:
🍻A can of beer will cost 14 cents more
🍹A can of cider or alcoholic fruit beverage will cost 14 cents more
🍷A bottle of wine will cost an extra 28 cents
🍾A bottle of fortified wine will cost an additional 47 cents
🥂A bottle of sparkling wine will cost an additional 89 cents
🥃A bottle of spirits, including whisky, gin, or vodka, will increase by R5.53
Tobacco excise duties will increase by 4.7% for cigarettes and cigarettes and 8.2% for pipe tobacco and cigars. This translates to:
- A R9.51 cents increase for cigars
- A 97 cents increase for a pack of cigarettes
- An extra 57 cents for a pipe of tobacco
The minister mentioned Kamogelo from Soweto, one of over 2,700 South Africans who sent Budget Tips to the Minister, suggesting introducing tax payment for hubbly bubbly, e-cigarettes, and other alternatives due to the increase in youth smoking. The government is increasing the excise duty on vapes to R3.04 per millilitre.
Read: SONA 2024: 5 Crucial Points from Ramaphosa’s Speech
The minister also mentioned the two-pot retirement system and said it would be available starting on the 1st of September 2024.
- Social Grant Increases
To keep up with inflation and improve access, permanent social grants have increased:
- Old age, war veterans, disability, and care dependency grants will increase by R100. This increase will be divided into R90 effective from April and R10 effective from October.
- The foster care grant will increase by R50.
- The child support grant will increase by R20.
According to Godongwana, these increases aim to assist the nearly 19 million South Africans who rely on social grants to cover their living expenses.
He also said efforts were being made to enhance the COVID-19 Social Relief of Distress Grant by April this year. For the grant’s extension beyond March 2025, the government will finalise social security policy reforms and funding sources.
Additionally, the budget includes provisions for job creation initiatives, with R61.4 billion allocated for employment programs over the medium term, including R7.4 billion for the Presidential Employment Initiative.
- Elections
The Minister stated that the Independent Electoral Commission (IEC) would receive an additional R2.3 billion to fulfil its duties during elections and beyond. Additionally, the police and defence sectors will receive an extra R350 million to support election activities. Another R200 million will be allocated for political party funding as parties prepare for the general elections.
The minister ended his speech by calling on South Africans to resist the extremes of blind optimism or crippling pessimism. “ Inde lendlela (This is a long journey). Madam Speaker, as I conclude, I want to remind South Africans that the message they should take from this Budget is this: government is making the most out of very limited resources,” he said.
