By Mzwandile Mamaila, Cape Business News Journalist
THE PwC South Africa 2023 National Budget Predictions took place on the 15th of February. Chief Economist of PwC South Africa, Lullu Krugel, highlighted South Africa’s economic predictions, with concerns about decreasing GDP and unachievable goals set by Government.
According to PwC’s 26th Global CEO survey, 59% of South African CEOs expect GDP to decrease, with load shedding being the main contributor. The declining GDP has brought concerns to South African companies as 40% of businesses fear that they might not be around in the next ten years if there is no intervention or change in strategy.
With average South Africans unable to implement solutions, they can solely rely on the Government. In the 2023 State of the Nation Address, President Cyril Ramaphosa declared load shedding a national disaster and announced the introduction of the Minister of Electricity. An R254 billion cash injection to Eskom was announced by Finance Minister Enoch Godongwana. The Government expects this fund to decrease the R422 billion debt for the next three years.
There has been a decrease in the compensation of employees to total consolidated expenditure from 34.5 in 2019/2020 to 31.6 in 2022/2023. The Government envisions a further decrease, to an estimated 30.8%, in 2024/2025. More ambitious resolutions to reduce the PIT rate are expected by increasing the tax base through greater economic growth, employment, and enforcement.
Even though the Government suggested these solutions, the PwC believes they might be ambitious, with possibilities of being unachievable. With South Africa consisting of the highest PIT (Personal Income Tax) burden amongst upper – middle-income countries, 0% expectations of reducing taxes, an estimated 5,5% increase in Fiscal Deficit due to slow GDP growth and increased spending pressure, and an increase in inflation, it seems as if there is still a long way to go.
As expenditure restraint poses a risk to State Owned Entities (SOE) such as Eskom and Transnet, Government has called for rationalization of these SOEs. “It’s a wrong assumption to make that services rendered by the private sector will always be more expensive. That is not the case,” stated Krugel, highlighting how the rationalization of SOEs might be necessary.
Furthermore, additional spending plans were implemented by Government to salvage the 2022 KZN floods. The Social Relief Distress Grant has also been extended to March 2024. “With these Grants, when they first introduced them during Covid, we were saying to each other as economists that the likelihood of Government having to turn around and say “we stopping them” is going to be very difficult,” stated Krugel highlighting how it might be a challenge for the Government to stop the rollout of the SRD Grant.
South Africa’s inconsistent trend of moving figures is noticeable to international analysts. That might be cause for concern for international trade and investments.
With South Africa being grey-listed by the Global Financial Action Task Force (FATF), it will be highly monitored, leading to a loss in some foreign investments and inevitably causing more harm to the GDP.
South Africa has failed to overcome the one-year observation warning before being officially grey-listed. Therefore, as per PwC’s concerns of over-ambition, it might be difficult to remain hopeful for the Government’s plans to sustain the nation.
