Medium-term budget: What you need to know

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BUSINESS NEWS AND VIDEO - Difficult trade-offs will have to be made in all spheres of government, said Finance Minister Enoch Godongwana when he presented the 2024 Medium-Term Budget Policy Statement (2024 MTBPS) to Parliament yesterday.

Here are some of the highlights:

Unit to deal with money laundering to be established

As part of efforts to exit the Financial Action Task Force grey list, government will establish a shared forensic capability within the Financial Intelligence Centre.

This will strengthen efforts to combat money laundering and the financing of terrorism and secure South Africa’s removal from the grey list.

South Africa is now deemed to have largely addressed 16 of the 22 action items in its Action Plan to exit the grey list.

Revenue from tax collection lower than expected

Revenue from tax collection in 2024/25 is expected to be down by R22.3b from National Treasury’s estimations made in February this year.

“Over the next two years, the main budget revenue estimate has also been lowered by R31.2b. In the absence of faster growth and in the face of external risks, tax revenue will remain under pressure, forcing us to make difficult decisions on where to spend.

“Lower revenue also means that we cannot, within the envelope, accommodate all of the demands on the fiscus. Difficult trade-offs, in all spheres of government, will have to be made.

“By sticking to our debt-reducing strategy and confronting these trade-offs, we can create the necessary conditions for a fast-growing economy that facilitates employment,” Godongwana said.

Economic growth strategy on four key areas

Over the medium term, government will anchor its economic growth strategy on four key areas to support inclusive growth.

Godongwana said that economic growth projections have been revised down from 1.3% to 1.1%.

“[Our] fiscal strategy sets out to achieve the fiscal sustainability needed to support inclusive economic growth.

“It carefully weighs competing demands, making the necessary trade-offs between what is most urgent and what must wait given the fiscal constraints. The strategy also supports critical social services and addresses the significant fiscal and economic risks that lie ahead,” he said.

The four key pillars are:

Maintaining macroeconomic stability
Implementing structural reforms
Building state capability
Supporting growth-enhancing public infrastructure investment.

Municipalities’ Eskom debt

National Treasury warned that municipalities’ slow compliance with conditions of the debt relief programme on arrears to Eskom risks delaying debt write-offs.

According to the National Treasury, success depends on municipalities maintaining a quarterly revenue collection rate of 85%, which is below the National Treasury collection norm for local government of 95%.

“Around 70 of the municipalities that had applied for debt relief have been approved. Between March and August 2024, compliance with relief conditions by municipalities improved from 55% to 76%, aided by the National Treasury, Provincial Treasuries, and the Municipal Finance Improvement Programme,” Godongwana said.

VIDEO: Watch the speech: