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Inside Education Reporter
The Minister of Finance is up for a tough speech on Wednesday.
Economists would like to hear about spending cuts accompanied by a major review of budgets and spending.
However, further austerity measures can cause a service delivery crisis.
This is according to Professor Waldo Krugell, an economist at the Faculty of Economic and Management Sciences at the North-West University (NWU), who looks ahead at what to expect when the Minister of Finance, Enoch Godongwana, delivers the 2024 Budget speech on 21 February.
Krugell said much will be said before and after the Budget speech this week. “It is normal to be concerned about how it affects your pocket – for example, can the minister increase the grant amounts and old age pension a bit, or what will happen to sin taxes and the fuel levy? Economists take a much broader view and will be talking about the sustainability of the fiscal stance,” said the Professor.
Simply put, he added that it is about whether the government will be able to continue with its spending plans, tax plans and financing of the deficit over the next three years and beyond.
“There are several things that can go wrong. The tax income that the minister budgets for is linked to the size and growth of the economy. If growth slows, the tax income shrinks. At the same time there is a lot of pressure for extra spending, such as extending grants and bailing out state-owned enterprises.
“Put together, less tax income and more spending mean that the government must borrow more.”
Krugell added that there are a few issues with borrowing more.
“Our quite large deficit is financed at particularly high interest rates compared to other emerging market economies. This pushes up the cost of servicing the debt. Debt service cost as a share of main budget revenue increased from 11,9% in 2024/25 to a projected 19,4% in 2024/25.
“That is almost 20 cents of every rand of tax revenue collected. It crowds out other spending. If one considers that the compensation of government employees makes up 36% of current revenue and transfers to households make up another 35%, that does not leave a lot of income for other spending.”
The other issue is, he notes, who will buy the government’s bonds?
Over the past ten years, according to Krugell, foreign investors have withdrawn from the bond market despite the relatively high interest rates that we offer.
“South African financial institutions, particularly the banks, have stepped in, but the Reserve Bank has warned that for the banks to hold even more bonds may start to present a risk to the stability of the financial system.
“In addition, offering very high interest rates to attract investors makes capital expensive for other borrowers, like corporates, who want to issue bonds. That limits investment. All in all, it is not straightforward to determine at what level the debt burden becomes unsustainable, but at a high level it does create uncertainty that has a negative impact on the exchange rate. That is bad for inflation, interest rates, the consumer, businesses, and the economy.”
So, Krugell says, economists will be listening for plans to put the government’s finances on a sustainable footing. That means increasing taxes or cutting spending.
“Though ideas like a wealth tax on individuals, or a tax on the super profits of a particular industry, are thrown about in the media from time to time, there are no serious proposals for a significant increase in taxes.
“Our tax base is quite narrow. There are around 385 companies in South Africa that earn over R200 million in taxable income, and they contribute 65% of the total company tax take. Around 1,2 million personal income taxpayers earn over R500 000 per year, and they represent about 65% of the total personal tax liability.
“There are more or less 275 000 taxpayers who earn over R1 million. This group represents under 2% of taxpayers and contributes over 35% of the total personal tax take. The geese that lay the golden eggs are relatively few and probably quite footloose. Any significant tax increases are likely to have negative consequences for investment and economic growth.”
Wits University is committed to enabling access to education*
In 2023, Wits disbursed approximately R1.5 billion to 26 076 students of which R646 million was NSFAS funding for 9 004 students.
R169 million was disbursed during 2023 for Wits scholarships and bursaries, which includes, inter alia, the following:
• R45 million for Undergraduate Merit and Scholarship Awards to support 3,343 undergraduate students,
• R68 million for Postgraduate Merit Awards to support 1 354 students,
• R28 million to the Wits Hardship Fund to help 1 441 students, and
• R4 million for eligible LLB students who were defunded by NSFAS.
The University will match the funds raised via the SRC’s fundraising campaign. The Wits Hardship Fund was established in 2016 with an initial amount of R10 million per annum allocated to assist academically deserving, missing middle students to register and to secure emergency accommodation (limited number of beds available). For 2024, R28 million has been allocated to the Wits Hardship Fund to assist eligible students who meet the criteria:
Students with a family income of under R600 000 and who owe more than R10 000 can apply.
Successful applicants receive 50% of the outstanding debt up to a maximum of R50 000, and students must meet the academic requirement of 48%. Students studying towards their first qualification are prioritised due to limited funds.
Funding sources
Students are encouraged to apply to NSFAS’ new loan scheme for the missing middle if they qualify and can also register for potential discretionary funding. Other options for funding include student loans, bursaries and sponsorships.
Wits offers a range of support services to students including transport services to and from residences and between campuses, primary healthcare services, an after-hour ambulance service in partnership with ER24, career counselling, academic and psychosocial support, clubs and societies, food security programmes, and initiatives to end period poverty.
Wits is doing all that it can within its means to assist students, be it through funding students, fundraising from various sectors, and administering financial aid, bursaries, and scholarships. The University will continue to work with the SRC, the public and private sector, donors and partners to assist students.
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