Last week’s euphoria around the Springbok World Cup victory was somewhat tempered by a tough-love Medium-Term Budget Policy Statement (MTBPS) delivered by Finance Minister Enoch Godongwana . As expected, the MTBPS showed wider deficits than projected in February due to the R56.8bn tax revenue shortfall. The 2023/24 budget deficit is now projected at 4.9% of GDP instead of 4%. This means that debt-to-GDP will peak later and at a higher level. SA’s debt-to-GDP ratio is not high by global standards, but has increased rapidly in recent years, and since government borrowing costs are high, this is not a sustainable situation.
The main positives from the MTBPS is that government remains committed to getting its finances in order and there is a strong emphasis on raising economic growth levels. This is ultimately the only thing that will make the fiscal numbers work in the long term.
Read more in the latest Prosperity by Private Clients, which gives a monthly market and economic update as well as an overview on recent developments within some of the companies held in our model portfolios.