The National Treasury has revised South African economy’s 2024 growth outlook from 1.3% to 1.1%.
Treasury had made the 1.3% economic growth projection in the 2024 Budget Review tabled in February; however, it was forced to reduce the projection due to weaker economic growth.
When delivering his budget speech at the National Assembly in Cape Town on Wednesday afternoon, Godongwana stated that the weaker economic growth projection was weighed down by “stop-start economic growth and stubborn inflation in the first half of the year”.
“The economy has since strengthened in response to the suspension of power cuts since March 2024, improved confidence following the formation of the government of national unity in June, better than-expected inflation outcomes in recent months and reduced borrowing costs.
“All these factors are expected to continue supporting the economy over the period ahead. GDP growth is projected to average 1.8% from 2025 to 2027, up from 1.2% in the preceding three years … underscoring the need for continued implementation of structural reforms,” said Godongwana.
“This subdued performance underscores the need for stronger policy measures to accelerate growth, tackle poverty and unemployment, and – because economic growth is the source of sustainable government revenues – ensure long-term fiscal stability.
SA has underperformed for 10 years
“For over a decade, South Africa has significantly underperformed compared with other emerging markets and developing countries.
“The reasons for this divergence include declining capital investment, inadequate energy supply, unreliable logistics, the high cost of doing business, a poor public-sector balance sheet, and a weak fiscal position,” he said.
Godongwana also stated that the budget revenue as a proportion of GDP was expected to decrease from 24.3% in 2023/24 to 23.9% in 2024/2025.
“This is a result of tax revenue growing slower than GDP, lower projected non-tax revenue and National Revenue Fund receipts, and higher SA Customs Union payments,” he said.
But sovereign debt set to decline; financial market stronger
The good news, according to Godongwana, was that the sovereign debt was expected to decline over the medium-term period.
He said the consolidated budget deficit will narrow from 5% of GDP in 2024/25 to 3.2% of GDP in 2027/28 and debt will stabilise at 75.5% of GDP in 2025/26.
“The domestic financial market remains strong and macroeconomic policy has achieved important milestones, such as a reduction in inflation during 2024 and a primary budget surplus – meaning revenue exceeds non-interest spending – in the
2023/24 financial year.
“These gains will be aided by reforms to unlock infrastructure investment and fiscal prudence,” said Godongwana.
He revealed that over the next three years critical reforms will include strengthening local government, harnessing digital public infrastructure, and integrating urban environments to make cities more efficient.
“Investment in infrastructure is necessary to support higher levels of growth and expanded access to quality basic services. Yet the quality of public-sector infrastructure spending is suboptimal and the quantity is inadequate.
“As a result, existing infrastructure is deteriorating, backlogs are growing and the cost of providing infrastructure is high. This represents both a challenge and an opportunity,” he said.
‘Investment in infrastructure necessary’
“Investment in infrastructure is necessary to support higher levels of growth and expanded access to quality basic services.
“Yet the quality of public-sector infrastructure spending is suboptimal, and the quantity is inadequate.
“As a result, existing infrastructure is deteriorating, backlogs are growing and the cost of providing infrastructure is high. This represents both a challenge and an opportunity.
He lamented that poor coordination within the public sector, lack of coordination within the public sector, poor collaboration with the private sector, and high borrowing costs frequently hindered the delivery of infrastructure projects.
“To address these problems, the government is transforming the way it prepares and delivers infrastructure projects.
“It is mobilising private-sector resources that will augment public sector capability and provide new channels for financing.
“In parallel, work is under way to improve the government’s capital budgeting process and strengthen institutional arrangements and governance across the ecosystem to facilitate private investment,” he said.
“The pace of growth is still being limited by persistent — though gradually easing — constraints, particularly in logistics infrastructure.
“Faster growth depends largely on maintaining macroeconomic stability, the continued implementation of structural economic reforms, improving state capabilities and supporting higher infrastructure investment.”
