Every year, round about this time, the Minister of Finance gives us feedback as to how the actual figures compare to those budgeted at the beginning of the year, and every time they are worse. If you read some of the commentary on the MTBPS (Medium Term Budget Policy Statement), mention is made of the fact that even though almost all the numbers are worse than expected, government is committed to making changes. You have to make up your own mind as to whether to believe this commitment or not.
This might sound like viewing the glass as half empty, and not seeing the positives of potential changes, especially when the private sector is allowed to step in and fix the mess. But when it comes to your life savings, rather plan for the worst and hope for the best.
In short some of the figures:
• National Treasury revised down the 2023 GDP forecast to 0.8% (down from 1.9% last year).
• The tax revenue collection for the 2023/24 financial year is expected to be R56.8 billion less than the budgeted estimate, with shortfalls in corporate income tax, VAT, and excise duties. Ironically, personal income tax collection is performing relatively well.
• The tax revenue shortfall and currency weakness contribute to a projected budget deficit of 4.9% of GDP for 2023/24, with gross government debt expected to increase to 74.7% of GDP.
• Unsurprisingly, the Social Relief of Distress (SRD) grant (COVID grant) will be extended for another year till after the 2024 election.
• The most startling number in the MTBPS is that the government will have to borrow R553 billion PER YEAR over the next three years. This will result in total debt rising from R4.8 trillion to R6 trillion in the 2025/26 financial year. Over the same period, total interest payments will be R1.3 trillion, or 22c of every rand the government spends.
To use an analogy; South Africa is currently crossing a very deep river and we are at that point where only our head is still above water. Even though this is precarious, it still means we are 100% alive.