South Africa has run out of money – Finance Minister responds
South Africa’s budget deficit widened further in August and September compared to a year ago as government expenditure continues to grow faster than revenue. However, Finance Minister Enoch Godongwana said this does not mean the country has run out of many.
The provisional financing data from the National Treasury for September 2023 also points to a widening budget deficit. The main budget deficit is expected to be R12.8 billion, compared to R3.3 billion in September 2022.
The Treasury said total revenue growth was 8.7% year-on-year in August, while total expenditure grew at a stronger pace of 9.2%. The cumulative main budget deficit in the first five months of the 2023/24 fiscal year amounts to R238.4 billion, or R254.4 billion, including Eskom debt relief.
This is much higher than the deficit of R160.7 billion in the same period in 2022/23. South Africa’s current debt-to-gross domestic product (GDP) ratio is 73%. The situation is set to become much worse as the country’s fiscal deficit this year will be around 6% of GDP.
In addressing this concern, The National Treasury proposed drastic measures to rein in spending as the government has run out of money and faces a debt trap.
The measures include a freeze on new public service jobs, stopping procurement contracts for all infrastructure projects, and keeping public servant salary increases in check.
“The spending cuts have been widely welcomed and indicated that the government had ‘run out of money’ and faced a ‘debt trap’ as growth had stalled,” The Sunday Times said.
Following these reports, Godongwana was asked in a recent parliamentary Q&A whether the government has indeed run out of money.
Godongwana responded, in short, by saying no, it hasn’t.
“The government is working to manage public finances in a prudent and sustainable manner. This includes appropriately responding to the materialisation of risks, including unforeseen economic and financial conditions. To be clear, the Government has not run out of money,”
The government publishes the “Statement of the National Government’s Revenue, Expenditure, and Borrowing” monthly on the National Treasury website. This statement provides detailed information about government revenue collections, expenditure and borrowing.
Revenue collections for the first four months of 2023/24 have performed below expectations, primarily due to under-collections in corporate income tax and higher VAT refunds.
Therefore, the main budget deficit for the first four months of 2023/24 is higher than expected. Compared to the 2023 Budget, the economic and revenue outlook has deteriorated, and tighter financial conditions have constrained the government’s borrowing programme and led to higher borrowing costs.
The minister said that the government remains committed to prudent fiscal management and addressing these challenges to ensure the financial stability of the nation.
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