First primary budget surplus since 2008, but it sure doesn’t feel like it

This year’s Budget speech, considering the election proclamation date of 29 May, is decidedly underwhelming. For critics expecting dramatic spending increases or grand populist plans, there was little to whine about. In fact, the finance minister has declared that for the first time since 2008/9 the country will declare a primary budget surplus .For anyone in South Africa who has been living under a rock, the country is on a poor growth trajectory. GDP growth last year was a paltry 0.

Over the long term, GDP growth for the country has averaged only 0.8% since 2012, a rate of economic growth that is insufficient to address high levels of unemployment and poverty. A growth rate of 5% or better is critical to tackle the deepening unemployment crisis in the country.The minister will spend R2.37 trillion in 2024/25, R2.47 trillion in 2025/26 and R2.6 trillion in 2026/27.

Debt repayments continue to weigh heavily on the fiscus, taking up 20 cents of every rand of spending – totalling R382.2 billion. The minister if optimistic about stabilising the debt level at 75.3% of GDP by 2025/26.Put us in a position to protect core services. It allows 60% of non-interest spending to be directed to the social wage. It also allows us to preserve capital spending.

The fiscus will also draw down R250 billion from the Reserve Bank’s contingency fund. It will use R100 billion this year and R25 billion a year for the following two financial years.Without selling the assets, this cash will create a financial liability for which R100 billion has been allocated to mop up liquidity and essentially act as a sterilisation cost for the use of the funds. Any future gains on reserves will revert to the Reserve Bank.

The key message, says Godongwana, is that the economy needs massive investment to grow and create jobs.Who we choose to trust can have a profound impact on our lives. Join thousands of devoted South Africans who look to News24 to bring them news they can trust every day. As we celebrate 25 years, become a News24 subscriber as we strive to keep you informed, inspired and empowered.

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