The ink is drying on the 2024 South African Budget speech, painted against a backdrop of global and domestic challenges. While a 3.2% global growth projection offers a glimmer of hope, shadows loom in the form of potential oil price hikes amid ongoing Middle East geopolitical tensions and China’s slowing economic growth.
Locally, 2023 presented a sluggish reality with 0.6% GDP growth estimated. Weaker consumer spending and reduced fixed-income investment were key culprits. Looking ahead, a modest 1.1% average GDP growth is anticipated between 2024 and 2026. However, a persistent threat hangs over this trajectory: power cuts, driving up the cost of keeping the light on.
Fiscal consolidation stands as a central focus. The 2023/2024 budget deficit is estimated at 4.9% of GDP, but a gradual decrease to 3.3% is projected by the end of the medium-term expenditure framework period. This encouraging trend reflects efforts to contain spending.
Taxpayers can breathe a sigh of relief – for now. No major tax hikes were announced. Neither the dreaded Value Added Tax increase nor a wealth tax materialized, and both the fuel and Road Accident Fund levies remain unchanged for the third consecutive year. Sin taxes, however, took a hit, with hikes ranging from ZAR 0.14 to ZAR 9.51 across various products.
The budget’s effectiveness hinges on various factors, including global economic conditions, the trajectory of oil prices, and South Africa’s ability to address its energy woes. The journey ahead promises to be challenging, requiring careful navigation and sustained commitment to reform.
Sources: National Treasury, MoneyWeb
Piece Written By Nkosilathi Dube, Trive Financial Market Analyst
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