South Africa’s Budget 2024: Godongwana teetering on the highwire

The 2024 Budget Speech presented by South African Finance Minister Enoch Godongwana paints a picture of cautious optimism amid lingering challenges. While acknowledging the calls for fiscal discipline, the budget demonstrates a commitment to both stabilising the debt burden and addressing critical social needs.

Joon Chong, partner at Webber Wentzel, outlines the key takeaways with a forward-looking lens:

Fiscal consolidation: A balancing act

The budget prioritises reining in the ballooning deficit, aiming to reduce it from 4.9% to 3.3% of gross domestic product by 2026/27. This commendable ambition comes with a balancing act. Non-interest expenditure is slated for a R80.6-billion reduction, raising concerns about potential impacts on crucial public services. However, the allocation of 60% of non-interest spending to the social wage, alongside increased funding for critical sectors like healthcare and education, signals a commitment to social justice.

Debt relief and infrastructure development: A legal dance

The proposed amendments to the Gold and Foreign Exchange Contingency Reserve Account and the R2-billion grant for smart prepaid meters showcase the government’s willingness to leverage innovative financial instruments and technology to address infrastructural challenges. However, the legality and effectiveness of these measures will depend on their meticulous design and implementation, adhering to strict legal frameworks and ensuring accountability.

Taxation: Balancing revenue needs and equity

The proposed tax increases – particularly on alcohol, tobacco and vapes – aim to raise R15 billion in additional revenue. While understandable in the current fiscal climate, these measures raise concerns about potential regressivity and their impact on lower income groups. The legality of these measures will hinge on their compliance with constitutional principles of fairness and non-discrimination.

Looking forward: A legal lens on sustainable growth

The budget’s emphasis on renewable energy, green incentives and public-private partnerships signals a recognition of the need for sustainable and inclusive growth. However, legal clarity and a robust regulatory framework remain crucial for attracting private sector investment and ensuring the legitimacy and effectiveness of these initiatives.