Budget Speech 2023 Statement

Publication Date: 22/02/2023

The Minister of Finance, Enoch Godongwana, was realistic about the challenges facing South Africa and pragmatic in the solutions he offered in his 2023 budget speech.

As the minister said, the lack of a reliable electricity supply is the country’s biggest economic constraint. In a move that will boost efforts to ease Eskom’s ongoing financial and operational crises, the minister has delivered on the promise that government will take over a substantial portion of Eskom’s debt: R254 billion over the next three years. By earmarking some of the financial relief for investment in transmission and distribution infrastructure, the minister is also laying the groundwork for South Africa’s energy market to be opened to other producers.

Now that some of the details of the financial relief being offered to Eskom have been announced, it is up to the minister’s cabinet colleagues to ensure that the conditions attached to the package are met; including improving availability of electricity and ensuring that municipalities, businesses and households pay for the service. Without these, Eskom cannot be financially or operationally sustainable.

The Banking Association South Africa (BASA) supports changes to the Bounce Back Loan Guarantee Scheme that will incentivise small and medium enterprises to invest in renewable and solar energy to deal with their energy constraints. BASA will engage with National Treasury to see how banks can best assist small and medium enterprises that want to participate in the scheme.

Financial Action Task Force

BASA agrees with the minister’s assessment that South Africa has made substantial progress in fixing the weakness in the country’s anti-financial crime system, identified in the 2021 Financial Action Task Force (FATF) Mutual Evaluation Report. The association also shares his caution that South Africa may still be placed under increased monitoring – otherwise known as grey-listing – when the FATF plenary meets this week to decide whether the country has done enough to meet global standards to combat money laundering and the financing of terrorism.
The allocation of R1,3 billion to the National Prosecuting Authority and to support the implementation of the recommendations of the State Capture Commission and FATF; and an additional R265,3 million to the Financial Intelligence Centre, is a necessary investment. Besides legislative weaknesses, FATF identified a lack of capacity to identify, investigate and successfully prosecute financial crimes, as a major failing in South Africa’s anti-financial crime capacity.
But as important as the minister’s budget allocations, is his statement that: “Addressing the FATF issues is part of the broader fight against corruption, crime, state capture and the deliberate weakening of the institutions of law and order in our country.”
FATF does not automatically call for the application of enhanced due diligence measures to be applied to grey- listed jurisdictions. However, in the event that South Africa is grey-listed, FATF will expect the country to commit to a national action plan to strengthen South Africa’s financial crime fighting capacity. BASA and its members will work with government and other stakeholders, to do whatever they can to ensure that the country is improves its financial crime fighting capacity and is removed from the list as soon as possible.

Economic Growth

Government must be held to the minister’s commitment to policies that support faster growth. A reduced economic growth outlook of 1,4% from 2023 to 2025, is disastrous for South Africa’s efforts to overcome increasing unemployment, poverty and inequality. The allocation of 60% of non-interest spending on the social wage cannot be faulted when the majority of South Africans live in social and economic distress, but inclusive economic growth is the fastest way to improve the lives of citizens.

The determination to further bring down the fiscal deficit and maintain a primary surplus over the medium- term, without resorting to tax increases and or further cuts in the social wage or infrastructure, will be a hard ask – economically and politically – especially since there is no certainty over the public sector wage bill, which is still being negotiated. However, BASA is encouraged by the minister’s call for a settlement that balances “fair pay and fiscal sustainability”; and his commitment to claw-back funds if there is an unbudgeted wage settlement by achieving savings from state entities and programmes.

The minister is correct that: “This is not an austerity budget. It is a budget that makes tough trade-offs in the interests of the country’s short and long-term prosperity.” The minister has done his part to boost business and investor confidence with this budget. It is now up to the president and his cabinet colleagues to ensure that the budget allocations are used to efficiently and effectively implement growth enhancing policies.