Economic experts have raised concerns about the South African budget tabled this week by Finance Minister Enoch Godongwana, highlighting insufficient structural reforms, the burden of public-sector wages, and an urgent need for greater private-sector involvement.
Speaking during a webinar hosted by TreasuryONE and ETM Analytics, George Glynos, Director at ETM Analytics, rated the budget three out of ten, describing it as failing to address South Africa’s structural economic challenges effectively.
Glynos highlighted persistent overspending and low revenue collection, noting the growing gap between government expenditure and income over the past decade, contributing to the country’s ballooning debt-to-GDP ratio, now near 75%. Glynos argued the country’s current economic struggles stem largely from insufficient infrastructure investment, especially by state-owned enterprises (SOEs), which have failed to capitalise on recent commodity booms. He suggested that meaningful economic growth would require a shift toward privatisation and greater private-sector involvement, particularly in network industries such as railways and ports.
TreasuryONE currency strategist André Cilliers echoed Glynos’ concerns, emphasising the urgent need for economic growth rather than continued reliance on social spending. He described the budget’s approach to reducing public sector wages as ineffective, criticising the government’s decision to offer above-inflation salary increases while planning early retirements rather than genuine staff reductions.
Further scepticism was expressed regarding the optimistic growth forecasts from National Treasury, with both Glynos and Cilliers pointing out past inaccuracies in Treasury’s predictions, which undermine investor confidence. They emphasised the need for transparent, realistic forecasts to improve trust in the budget process.
Panelists also raised concerns about VAT increases, noting potential impacts on inflation, though smaller than initially feared. Questions from attendees included the government’s ability to collect an additional R800 billion through SARS investments, with experts urging caution and highlighting the importance of tackling illicit trade rather than overburdening compliant taxpayers.
Reflecting on the coalition government (GNU), the webinar concluded that significant political pressures and divergent party positions could result in further changes before the budget is finalised. Both Glynos and Cilliers noted that South Africa’s economic recovery hinges on substantial policy and ideological shifts within government, suggesting upcoming local elections could act as a wake-up call for the ANC and its coalition partners.