In a much-anticipated address, Finance Minister Enoch Godongwana delivered South Africa's 2024 Budget speech in Cape Town, outlining the government's fiscal priorities and economic strategies for the upcoming year. Despite mounting pressure to stabilise the nation's finances, the speech notably avoided major tax increases, opting instead for targeted measures and prudent financial management.
For the third consecutive year, there were no significant hikes in value-added tax (VAT), wealth tax, fuel levy, or Road Accident Fund levy. This decision, while relieving for taxpayers, comes with its own set of consequences. Notably, the government announced tapping into South Africa's Gold and Foreign Exchange Contingency Reserve Account (GFECRA) for the first time in two decades. Overseen by the South African Reserve Bank (SARB), the GFECRA will play a pivotal role in managing debt, funding essential public services such as healthcare and education, and maintaining the budget deficit at 4.9% of GDP, in line with the goals set in the 2023 Medium-Term Budget Policy Statement (MTBPS).
Highlights of the fiscal framework and economic outlook include planned total revenue and expenditure figures for the upcoming years, predictions for GDP growth and consumer price inflation (CPI), and a commitment to the fiscal strategy outlined in the 2023 MTBPS. Forecasts indicate a decrease in the consolidated budget deficit from 4.9% to 3.3% by the end of the 2024 medium-term expenditure framework (MTEF) period.
Tax proposals and adjustments were made with careful consideration. The government announced the utilisation of SA's contingency reserves totalling R150 billion over the next three years, with an additional R100 billion allocated to support the SARB. There were no changes in income tax rates or VAT, fuel, or Road Accident Fund levies. However, the implementation of a global minimum corporate tax rate of 15% for multinational corporations was introduced, alongside incentives for electric vehicle producers to claim 150% of qualifying investment spending.
In line with the government's efforts to address public health concerns and generate revenue, sin taxes were increased above inflation in various categories, particularly alcoholic beverages, and tobacco products. Social grants, however, received marginal increases in 2024, below the current inflation rate, affecting beneficiaries across various categories including foster care, child support, and old age pensions.
In summary, the 2024 Budget speech underscored the government's commitment to fiscal stability without resorting to major tax hikes. By utilising reserves and implementing targeted measures, South Africa aims to manage debt effectively, support key sectors, and make incremental adjustments to social grants and sin taxes. As the nation navigates through economic challenges, prudent financial management remains paramount in ensuring sustainable growth and development.
Source: 1. South African Government: https://www.gov.za/news/speeches/minister-enoch-godongwana-2024-budget-speech-21-feb-2024#:~:text=Taken%20together%2C%20even%20with%20the,per%20cent%20by%202026%2F27.
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