The recent address by Finance Minister Enoch Godongwana at the launch of the Government of National Unity’s (GNU) first MTBPS has elicited strong reactions and analysis, including from Professor Raymond Parsons of the NWU Business School. The speech is intended to be a pragmatic, realistic and credible strategy to address the persistent challenges of low economic growth and high public debt that plague South Africa.
The MTBPS for 2024 is fully consistent with the Government of National Unity’s overall commitment to increased inclusive economic growth and job creation. The news of achieving a primary budget surplus and stabilising the debt-to-GDP ratio at 75.5% is encouraging, although debt reduction will be spread over a longer period.
Yet, risks remain in the fiscal landscape, particularly with regard to the public sector wage bill, which represents the greatest immediate risk to South Africa’s public finances. The MTBPS for 2024 therefore focuses on consolidating longer-term fiscal buffers and benchmarks to ensure fiscal sustainability. However, a more in-depth analysis of fiscal data and commitments is expected when the promised Medium-Term Development Plan is available in January, and the main budget is presented in February.
By identifying better growth prospects for a more sustainable future fiscal balance, the MTBPS has been able to capitalise on the momentum of the policies put in place by the Government of National Unity as well as the early signs of economic recovery. It is now recognised that investment and infrastructure development are key to driving stronger growth and creating jobs. This is why the MTBPS focuses on investment-led growth, with greater private sector participation.
The Minister of Finance is right to point out that South Africa’s main problem is essentially one of economic growth. The assumption of modest GDP growth of 1.8% on average over the next three years underscores the need for a policy agenda to improve these growth prospects. What South Africa needs is a few years of stable and irreversible economic growth to transform short-term business confidence into long-term investor confidence. This means that the national unity government must remain faithful to its economic commitments in the months ahead..
This recent MTBPS has charted a new economic path that, if properly implemented, would facilitate the search for a balance between growth-enhancing measures and the stabilisation of the still high debt-to-GDP ratio over the next three years. The challenge for the Government of National Unity is therefore to create a macroeconomic environment that is unquestionably based on the pillars of efficiency, stability, coherence and certainty, which would also be in line with the theme of South Africa’s G20 presidency in 2025.