Ina Opperman

By Ina Opperman

Business Journalist


Budget 2024: What to look out for

Consumers and businesses are holding their breath waiting for the finance minister to deliver the 2024 Budget Speech on Wednesday.


Although a consumer-friendly budget is expected as this is an election year, there is always the fear that the ruling party will go too far and look for extra revenue to fund election promises, such as a basic income grant and National Health Insurance.

Here is a list of issues to look out for when finance minister Enoch Godongwana starts speaking at 14:00:

Social Relief of Distress Grant

The president alluded to the Social Relief of Distress (SRD) grant in his State of the Nation Address (Sona) and it is almost a certainty that the minister will announce that it will continue.

“Having already factored in an extension of the grant in the medium term budget until March 2025, it is unlikely the minister will go back on this,” associate professor David Warneke, partner at BDO South Africa, says.

Basic income grant

However, Warneke says, dreams of a basic income grant may remain deferred, given current economic constraints.

“In the past, rightly emphasised the need for sustainable economic growth to finance such initiatives. Implementing a basic income grant requires a stable economic foundation, which we must prioritise building before introducing such a measure into the budget.”

Public sector wages

The question of public sector wages is perhaps a more contentious issue, Warneke says.

“Last year’s budget projected a 0% increase, with subsequent negotiations resulting in a 7.5% raise. Any sort of increase raises concerns around the sustainability of our public wage bill, particularly when compared to international standards.”

ALSO READ: Budget 2024: A game of give and take – economists

Funding to employ unemployed doctors

Health minister, Dr Joe Phaahla, said recently government is working to ensure that unemployed doctors who want to join the public service are placed by 1 April this year.

“I am happy to announce that working with the Minister of Finance we have a solution to address the current challenge of doctors who want to stay in the public service but could not be offered funded posts.

During the debate on the Sona, Phaahla said the finance minister will flesh out more details during his Budget speech on how these posts will be funded.

Nsfas funding

Warneke says the need for an increase in funding for Nsfas is crucial, given recent medium term budget cuts that threatened about 87 000 students’ access to higher education.

“Investing in education is investing in the future of our nation, but it must be done responsibly to ensure long-term economic benefits.”

National Health Insurance

The National Health Insurance (NHI) Bill looms large, yet substantial budget allocations may be deferred amid constitutional challenges, Warneke says.

ALSO READ: Budget 24 preview: tough choices or an election-friendly budget?

State-owned enterprises

The fate of state-owned enterprises (SOEs) remains uncertain, with discussions on mergers and closures ongoing.

“Any decisions must balance fiscal responsibility with the need to streamline operations and improve efficiency. Once again, given elections, it is doubtful that anything will be announced here as it might imply job cuts,” Warneke says.

Tertia Jacobs, treasury economist at Investec says we must check if Transnet gets a bailout.

“The medium-term budget does not allocate new funds to SOEs according to Sona 2024 and the minister has stated that any assistance will aim to improve efficiency, yet Transnet is seeking large financial support due to its liquidity issues.”

Government debt

Ania Strydom, compliance research manager at PaySpace, says debt remains the leading concern.

“State debt has been rising consistently for over a decade, then ramped up considerably in 2020, crossing the 70% of GDP threshold in 2021. Despite a brief dip in 2022, the debt surged again and is now consistently above that mark. In real terms, the minister will need to raise an additional R15 billion for the 2024/2025 fiscal year and faces a significant revenue shortfall totalling around R111 billion.”

She says Godongwana has three options to raise this money: raise taxes, cut spending, or borrow more. “Judging by previous comments by the minister, all three options are on the table, but they are not ideal choices. Increased taxes will put more pressure on South Africans, reduced spending does not encourage growth and more borrowing adds to the debt mountain that channels considerable amounts of revenue to interest payments.”

ALSO READ: Budget 2024: expectations in the face of revenue shortfall of R56.8 billion

Using South Africa’s gold and foreign currency reserves

Warneke says another contentious proposal is the potential use of some of the country’s gold and foreign currency contingency reserves amounting in total to about R500 billion to help alleviate public debt.

Jacobs says the minister may provide a way forward on government’s intentions for these funds but the optimal use of these funds should align with a broader fiscal strategy that prioritises sustainable growth and fiscal stability.

“Investors and rating agencies will closely watch the government’s decisions in this regard, as they will have significant implications for South Africa’s fiscal health and economic prospects.”

Tax hikes

Tax hikes also present a looming spectre, Warneke says, as the minister will have to extract an additional R15 billion of taxes in the medium term budget.

“However, it would risk further burdening an already strained populace, which the minister may not want to do ahead of the polls. Additional tax may also be extracted through less than full inflationary relief from bracket creep.”

Strydom says building on last year’s speech, there might be respite for taxpayers by adjusting tax brackets to align with inflation, ensuring people are not pushed into higher tax brackets without cause. There will likely be no changes to personal income tax rates, keeping the highest marginal rate at 45%.

She says corporate income tax was reduced two years ago to 27% during the budget speech, encouraging more corporate investment and it is unlikely that the rate will change this year. She adds that despite rising fuel prices, government kept the fuel levy stable for the past year, but adjustments may be necessary in the 2024 budget to keep pace with inflation.

“VAT is a touchy subject. It affects everyone in the country. On the other hand, a mere 1% increase could yield approximately R24 billion in additional revenue, especially given that the current VAT rate is comparatively lower than that of other countries.

Jacobs says the most plausible scenario is fiscal drag or bracket creep, where individuals are pushed into higher tax brackets as their nominal incomes increase, leading to higher tax payments without explicit increases. Personal income tax (PIT) remains government’s primary revenue source, increasing from 33.7% to 37.4% in FY23.

Infrastructure financing and public private partnerships

Using private sector skills and capital for infrastructure revitalisation is key to accelerating progress and, therefore, the announcement of a strategy to attract private and international financing for infrastructure projects is high on the agenda, Jacobs says.

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