2024 Medium Term Budget Policy Statement

Finance minister Enoch Godongwana.

Given the fine budgetary line that still had to be walked by Finance Minister Enoch Godongwana, the GNU’s first MTBPS comes across as a pragmatic, realistic and credible strategy to again tackle South Africa’s challenges of low economic growth and high public debt, says Prof Raymond Parsons, economist at the NWU Business School.

The 2024 MTBPS was broadly aligned with the GNU’s overarching commitment to higher inclusive economic growth and job creation. It is welcome news that South Africa is now achieving a primary budget surplus and that the debt-to-GDP ratio is to be stabilised at 75.5%, although debt reduction is to be spread over a longer period.

Also, risks to the fiscal outlook remain elevated. On the spending side the Public Sector Wage Bill remains the biggest single immediate risk to South Africa’s public finances. The emphasis in the 2024 MTBPS was therefore to further consolidate longer-term fiscal buffers and guardrails that must help to ensure fiscal sustainability. The fiscal data and commitments supporting the MTBPS will nonetheless need to be further interrogated when the promised Medium Term Development Plan in January is available and the main Budget is presented in February.

In identifying better growth prospects for a more sustainable future fiscal balance, the MTBPS has now been able to build on the policy momentum created by the GNU, as well as the tangible evidence of an incipient economic recovery. The MTBPS now also recognises the importance of unleashing investment and infrastructural development as the kingpins of sustained stronger growth and job creation. The emphasis in the MTBPS is therefore on investment-led growth, with increased participation for the private sector.

The Finance Minister is right to say that South Africa’s problem is "basically a growth one". The MTBPS assumption of a modest average 1.8% GDP growth over the next three years reinforces the need for an action-orientated agenda to improve on these growth prospects. What South Africa needs is a couple of years of steady and irreversible economic growth to convert short-term business confidence into long-term investor confidence. This means that the GNU must ‘stay on message’ regarding its economic commitments in the period ahead.

The latest MTBPS has outlined a new sense of economic direction which, if properly implemented, would now make it easier over the next three years to strike the right balance between growth-enhancing measures, on the one hand, and stabilising the still challenging high debt-to-GDP ratio, on the other. The challenge to GNU policymaking is therefore to create a macro-economic environment indisputably based on the pillars of efficiency, stability, consistency and certainty, which would also resonate with the theme of South Africa’s presidency of the G20 in 2025.