As South Africa approaches the highly anticipated budget speech, economists, Dawie Roodt and Ulricht Joubert, have painted a bleak picture of the country’s economic future, warning that the Minister of Finance faces a difficult and challenging task ahead.
Finance Minister Enoch Godongwana, is expected to deliver his speech on Wednesday 19 February 2025.
Roodt provides a critical assessment of the South African economy: “The context is a context where the South African economy is in deep trouble, not growing.”
While he acknowledged some potential for modest economic acceleration, he cautioned: “We’re not talking about shooting the lights out.”
Roodt’s concerns extend beyond domestic issues, with the "Trump factor" standing out as a major potential risk.
He suggested that actions taken by former U.S. President Donald Trump could “potentially do really significant harm to the South African economy” this year, further complicating the government’s fiscal planning.
Turning to domestic fiscal matters, Roodt highlighted the alarming state of the country’s growing debt levels.
“Fiscal debt levels are getting out of hand, and we need to cut back on borrowing, which means we have to cut back on state spending,” he explained.
The economist also points to the increasing demands on the Minister of Finance to find additional funds.
“In the meantime, we have this huge and increasing demand on the Minister of Finance to spend more money.”
He specifically called for funding support for State Owned Enterprises (SOEs) like Transnet, though he argued that others, such as the Post Office, should be allowed to “just let it go and let it die.”
Roodt also expressed concern over the impact of rising public sector wages, noting that “civil servants will apparently get more than inflation adjustment on salaries again, which is a major problem.”
With insufficient revenue to cover these growing costs, he anticipates “some tax increases,” particularly targeting sin goods and fuel levies.
He also suggested that “personal income taxes” may rise due to fiscal drag but warned against further VAT increases, describing it as “not a clever idea to zero-rate more items.”
Roodt highlighted the difficult position the Minister of Finance finds himself in.
“The economy is simply overtaxed. The economy is not growing.”
He stressed: “We are losing out on the capital infrastructure of the country.”
Joubert shared many of Roodt’s concerns but added his own perspective on the challenges ahead.
Like Roodt, he believes a sin tax increase is likely, but questions the logic of taxing fuel as a “sin.”
“I don’t know what sin we commit when we fill up our vehicles.”
He also warned that “there is actually no room to increase taxes” given the country’s ongoing economic struggles.
“Expenditure is increasing all the time,” Joubert pointed out, particularly due to agreements such as a 5.5% salary increase for trade unions.
With South Africa’s national debt increasing, Joubert stressed that the government’s options are limited.
“They must limit their expenditure,” he advised, pointing out that SOEs like Eskom and Transnet still require substantial support.
He suggested that privatization has been somewhat successful in areas like electricity and transport, but insists that “these entities can’t survive without further assistance” due to corruption and mismanagement.
Joubert also raised concerns about public sector salaries, noting that “the number of people on the unemployment bill is rising all the time.”
Regarding infrastructure investment, Joubert remained sceptical: “I don’t know to what extent the budget will really tell us that these massive investments and spending on infrastructure are likely to happen within the next financial year.”
Joubert reflected on the difficulties the Finance Minister faces, stating, “I don’t think it’s going to be an easy budget, I’m very glad I’m not in his shoes.”