Business noted on Thursday that while Finance Minister Enoch Godongwana outlined government's strategy to avoid a full-blown fiscal crisis and systemic risks to the economy, it is concerned that although the focus is now firmly on structural reform as demanded, those responsible for its implementation cannot be trusted as the nation "has been here before".

Godongwana delivered his Medium-Term Budget Policy Statement (MTBPS) on Wednesday, in Parliament, where it was announced that government now expected to earn almost R57-billion less in taxes than it previously forecast.

The Federation of Unions of South Africa highlighted that it understood the need to cut down spending, as revised down by R21-billion this financial year, R64-billion in 2024/25 and R69-billion, the year after.

The federation highlighted that these proposals came as no surprise as government had been open about the intention to cut spending.

"However, we disagree with the approach which seeks to apportion the responsibility for these savings to government departments through the cost-containment guidelines issued by the National Treasury some weeks ago," said the federation.

Business Leadership South Africa CEO Busi Mavuso welcomed Godongwana's commitment to stabilise public finances and reform the economy to generate higher growth.

"As we expected, revenue has fallen short of the amounts initially budgeted for this year and as a result the budget deficit will be 4.9% of gross domestic product (GDP), considerably worse than the previous estimate of 4%. However, the minister committed to a number of important targets, including fiscal consolidation, reduced expenditure, no significant tax increases and reorganisation of government functions. Spending was revised down by R21-billion for the current financial year with further reductions of R64-billion in 2024/25 and R69-billion in 2025/26 proposed," said Mavuso.

She said this was highly positive for government's credibility as a custodian of the public purse, showing the discipline needed to manage expenditure in the face of far higher debt costs and very little room for tax increases.

She highlighted that Godongwana recognised that the most effective way of funding government is through an efficient tax administration and by broadening the tax base, which required improving the efficiency of tax collection but also measures to grow the economy.

North-West University Business School's Professor Raymond Parsons highlighted that while it may have been inevitable that the Medium-Term Budget allowed public debt levels to rise even further, it must be seen as a stop-gap measure that still needed to be remedied by appropriate economic steps.

Parsons explained that South Africa's public finances remained on a slippery slope, and the risks to the fiscal outlook remained elevated.

"It is, thus, necessary that such remedies and reforms as were promised in the Medium-Term Budget are tangibly implemented as soon as possible. With the overall debt-to-GDP ratio now projected to reach 77% in two years' time, this will be the highest ever in South Africa's fiscal history. What still appears to be lacking in the 2023 MTBPS is a clear fiscal plan to wind down deficits and government spending over time," he said.

CUTS TO CABINET PORTFOLIOS

The Free Market Foundation (FMF) has urged National Treasury to take the steps needed to mitigate the current economic crisis that South Africans are facing.

"Our economic situation demands decisive action. The current gross deficit is R54.7-billion higher than forecast in the February Budget, and could well be much higher if current budget trends are realised. Taxpayers simply cannot afford the extent of government spending. Serious cuts need to be made urgently", said FMF CEO David Ansara.

He said the Minister's intimations of fiscal responsibility were welcome, but wholly insufficient given the scale of the crisis.

The FMF urged government to start limiting State spending by cutting any C...