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SA Budget Speech 2023

Advice & Comments

23 Feb 2023

Finance minister Enoch Godongwana announced his Budget speech in Parliament on Wednesday. On balance, while macroeconomic risks persist, the 2023 Budget was in line with market expectations, reiterating government’s commitment to stabilising debt.

4 Things You Should Know:

1 | Economic Growth Economic growth is expected to slow in 2023. Government forecasts that power failures, a weaker performance amongst the world’s largest economies and persistently higher inflation will reduce South Africa’s GDP growth from 2.5% in 2022 to 0.9% in 2023. Thereafter, government expects economic growth of 1.5% in 2024 and 1.8% in 2025. 2 | Eskom and SOEs  The South African government announced that it will take over R254bn of Eskom debt over the next three years.  The utility’s current debt stands at an unsustainable R423bn.  Some of the actions that Eskom and the government are taking to alleviate the power crisis include: The appointment of an international consortium with experience in coal-fired power stations to review all plants in Eskom’s coal fleet. Improving Eskom’s plant performance, ensuring it buys power from independent power producers, and importing power from neighbouring countries.  Clearing regulatory obstacles to bring electricity into the grid rapidly.  Supporting the rollout of rooftop solar panels for households with a tax incentive to encourage electricity generation. Individuals who install solar panels from 1 March can claim a rebate of 25% of the cost, up to a maximum of R15,000. The incentive will be available for one year. Businesses will be allowed to reduce their taxable income by 125% of the cost of an investment in renewables from 1 March. 



Since the 2009 fiscal year, the government has provided the utility with R263.4bn in rescue funding. The latest injection will take that to R517.4bn. Yet, Eskom still had a record 207 days of load shedding in 2022 compared with 75 days in 2021. At the same time, between the 2012 and 2022 fiscal years, state-owned companies received about R267bn in bailouts from the government. Contingent liabilities arising from state-owned companies will have risen from R84.4bn in the 2009 fiscal year to R479bn by the end of the 2023 fiscal year. 

3 | The Fiscus  Government’s fiscal consolidation measures have registered some progress in narrowing the budget deficit. Debt relief to Eskom will however increase the debt-to-GDP ratio. National Treasury government debt is now forecast to peak at around 73.6% of GDP, with the higher peak mainly owing to R254bn of relief for Eskom.  Key Takeaways: National Treasury debt service costs as a percentage of revenue will increase from 18% in 2023 to 19.8% in 2026. The state expects to spend an annual average on debt service costs of R367bn.  ‘Tax revenue collections for 2022/23 are expected to exceed the 2022 Budget estimate by R93.7bn. The National Treasury’s 2022 state of local government finances report found that 169 municipalities were in financial distress by the end of the 2022 fiscal year. That is a significant deterioration from the end of 2011, when only 66 of the 257 municipalities were in financial distress. The extent of government funds allocated to municipalities is therefore set to rise to more than 10% by the 2025 fiscal year. That is up from 8.7% in the 2023 fiscal year. National Treasury will allocate R14bn over the medium term to fight crime and corruption.  Social grants will increase by about 5%, which is below inflation, in the 2023 fiscal year. In addition, the Covid-19 social relief of distress grant will be extended for a year until 31 March 2024. 4 | Taxes  Government proposes tax relief totalling R13 billion in 2023/24 to support the clean energy transition, increase the electricity supply and limit the impact of consistently high fuel prices. Key Takeaways: Inflation-related adjustments to the personal income tax tables, the retirement tax tables, and transfer duties are provided. Excise duties on alcohol and tobacco will increase in line with expected inflation of 4.9 per cent. The rate for sparkling wine is pegged at 3.2 times that of natural unfortified wine. As in the 2022 Budget, government again proposes no changes to the general fuel levy or the Road Accident Fund levy. R4 billion in relief is provided for individuals that install solar panels, and R5 billion to companies through an expansion of the renewable energy tax incentive. 


To Conclude

Investors will draw some comfort from the continuity of fiscal discipline and more clarity around the support for Eskom. Fiscal risks however remain. Investors will continue to be concerned about the downside risks to economic growth and the recent surge in loadshedding as well as the upside risks to spending on social grants, wages and SOE support.  The FATF grey-listing decision is expected at the end of this week. While some measures to help fend off the grey-listing (R1.3bn for the NPA, R265.3mn for FIC, 2 laws introduced which address 15 of the 20 legislative deficiencies identified by FATF) are encouraging, South African’s “should be prepared for this possibility”. 


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