Finance Minister Enoch Godongwana says the government expects 0.8% growth in real gross domestic product (GDP) in 2023, providing a slightly optimistic outlook.
The forecast is based on the government’s economic policy, which aims to revive the ailing economy and create jobs.
The prediction is 0.1 percentage points lower than the estimated growth projection for the 2023 budget. Godongwana said over the next three years until 2026, growth is expected to average 1.4%.
Growth rates not sufficient
These growth rates are not sufficient to achieve South Africa’s desired development levels. However, Godongwana said the country’s economy showed signs of resilience.
He said real GDP, which measures economic performance, is currently above pre-pandemic levels. “In the first half of the year, the economy grew by 0.9% despite record levels of loadshedding,” he said.
He said the tourism sector grew more than 70% during the period, driven by the arrival of more than 5-million international tourists.
“Agriculture expanded by 7.8% in the period compared to 2022, while the construction, transport, and communications sectors also achieved strong growth.”
The finance minister agreed with President Cyril Ramaphosa that “these are the reasons for hope”.
Said Godongwana: “Unfortunately, since February, the risks to the economy that we warned about including the decline in global commodity prices that granted us substantial revenue last year, elevated inflation, and the rand depreciation, have materialised.”
Consequently, public finances were significantly weaker. The main budget deficit also increased by R54.7-billion compared with 2023 budget estimates.
“This reflects lower revenue performance, higher wage bill costs, and higher projected debt-service costs,” he said.
Fall in corporate income tax
Among the main reasons for low revenue performance, he said, was a sharp fall in corporate income tax, particularly from the mining sector, although personal income tax collection was better than forecast.
“The result of the shortfall is a substantial worsening of the main budget deficit in the current fiscal year.
“We are now projecting a deficit of 4.9% of GDP compared to our previous estimate of 4%. Under these circumstances, measures to stabilise public finances and reform the economy to generate higher growth are essential.”
Godongwana said the most effective way of funding the government is through efficient tax administration and by broadening the tax base.
He said the revenue collector would continue its focus on enforcing compliance in areas such as debt collection, fraud prevention, curbing illicit trade, voluntary disclosures, and encouraging honest taxpayers to comply voluntarily.
“Every additional rand of revenue collected is one rand less than we have to borrow.”
