Breaking down the Mid-Term Budget

South Africa's Medium-Term Budget reflects difficult and contested decisions, says Seán Mfundza Muller, a senior research fellow at the Johannesburg Institute for Advanced Study at the University of Johannesburg.

- Seán Mfundza Muller

The Medium-Term Budget Policy Statement presented by Finance Minister Enoch Godongwana to Parliament on 1 November 2023 is intended to provide a preview of government’s public finance plans over the next three years.

It does not actually commit government to anything, either in law or in practice. Nevertheless, it is a crucial document because it presents what the National Treasury intends to be the broad, financial foundation for the functioning of national, provincial and local governments in the near future.

This year’s statement is particularly important for two reasons. The first is that South Africa’s fiscal situation is arguably at its worst in the post-apartheid era. The second is that any decisions taken, especially about the 2024/25 fiscal year, could affect how South Africans view the current government when voting in next year’s elections.

The crucial background to this year’s statement is that South Africa’s national debt levels relative to the size of the economy have increased substantially since 2008. The statement emphasises that the increase was approximately 47 percentage points from 2008. The three main reasons are the global financial crisis that started in 2007, continued slow economic growth partly as a result of state capture and power outages, and the COVID-19 pandemic.

Additional reasons include lower tax collection, other major expenditure increases such as the ‘free higher education’ policy, announced unexpectedly at the end of 2017, and large transfers to the state-owned power utility Eskom in response to its worsening financial position.