CAPE TOWN (Reuters) – South Africa’s finance minister will propose tax measures next year to raise additional revenue, a mid-term budget review said on Wednesday, as the National Treasury projected wider budget deficits and higher debt over the next three years.
A major constraint on South Africa’s economic growth potential in the last decade has been rolling power cuts as utility Eskom struggles with breakdowns at its coal-fired power plants. Underperformance at state-owned logistics company Transnet has also weighed on growth.
This, coupled with a significant drop in mining revenue as commodity prices fall, has resulted in lower tax receipts. Revenue collections in the current 2023/24 fiscal year were projected to be 56.8 billion rand ($3.04 billion) below estimates in the main February budget, the treasury said.
The treasury said it remained committed to stabilise public finances. This will be achieved through spending reductions, moderate tax revenue measures and efficiency measures across the government – including the reconfiguration of government that would involve the merging or closure of public entities.
“Given the extent of fiscal consolidation required, the Minister of Finance will propose tax measures to raise additional revenue of 15 billion rand in 2024/25 in the 2024 budget,” the treasury said.
The treasury did not elaborate on the specific measures, but Finance Minister Enoch Godongwana said in his budget speech that “our most effective way of funding government is through an efficient tax administration and by broadening the tax base”.
South Africa’s 2023 economic growth is forecast at 0.8% from 0.9% seen in February. The economy grew by 1.9% in 2022.
A consolidated budget deficit of 4.9% of gross domestic product (GDP) is expected in 2023/24, wider than a 4.0% deficit seen in February. Next year the treasury predicts a deficit of 4.6% of GDP and the following year 4.2% of GDP, wider than the 3.8% and 3.2% seen in February.
South Africa’s gross debt is expected to rise to 6.52 trillion rand in 2026/27 from 5.24 trillion rand in 2023/24. As a percent of GDP, gross debt is seen stabilising at 77.7% of GDP in 2025/26 compared with 73.6% of GDP in the same year seen in February.
($1 = 18.7143 rand)
(Reporting by Wendell Roelf in Cape Town, and Kopano Gumbi, Anait Miridzhanian and Olivia Kumwenda-Mtambo in Pretoria; Additional reporting by Nellie Peyton, Bhargav Acharya and Tannur Anders in Johannesburg; Editing by Alexander Winning)
