Budget Speeches are rarely expected, or wanted, to deliver any major surprises. However, being an election year and with several big-ticket items having been discussed in the preceding months, this year's budget did have some interesting questions to deal with.

For starters, there were a couple of popular items that we did not see much of in the budget that we may have expected to hear more on. This includes:

1. National Health Insurance (NHI): No clear allocation on the funds and resources required to kickstart the NHI suggests that the Treasury recognises that we have a long way to go towards fully implementing an NHI scheme. Most experts agree that various institutions around public health and administration will need to be improved first if the NHI has any realistic chance of succeeding.
2. Basic Income Grant (BIG): There is no evident pathway regarding the expansion and/or consolidation of the country's elaborate social grant scheme programme in moving towards a BIG. The funding requirement and implementation of the BIG in the context of South Africa's socio-economic situation requires a lot more (unbiased) research before Treasury will be able to move forward in a meaningful way.
3. State-Owned Enterprises (SOEs): Not enough was said about the dire and costly state of key SOEs and the services they are meant to provide. The Minister did indicate that various amounts of money will be allocated to help turn-around failing SOEs, but most observers agree that it is unlikely to be enough to solve the fundamental problems they face. Any credible and detailed plan on structural reforms that will help improve performance, root out endemic corruption, and lower input costs was also not forthcoming. Until then, SOEs will continue to be a drain on the economy and the fiscus, lowering our potential growth and our ability to reach socio-economic development goals.
4. E-Tolls: For those mainly in and around Gauteng, no detail was provided on an agreement between the National Treasury and the Gauteng Provincial Government (GPG) on an alternative funding model for the Gauteng Freeway Improvement Project (GFIP). It remains to be seen how the GPG plans to fulfil their long-standing promise of getting rid of e-tolls without compromising of their fiscal position.

Moving onto four interesting aspects of the Budget Speech that we did see and is worth noting.

1. Taxes: Treasury used a well-known trick related to income tax brackets to increase tax revenue without explicitly having to raise any major taxes such as VAT (value-added tax) or income taxes. By not adjusting the income tax brackets for inflation, many workers will effectively be paying over a bigger share of their income to the fiscus. There was also no increase in the general fuel levy specifically, but other taxes on fuel such as the carbon tax did increase slightly.
2. Gold and Foreign Exchange Contingency Reserve Account (GFECRA): The now increasingly known, yet probably still little understood, GFECRA has garnered a lot of attention since it suddenly appeared on our radars thanks to the Institute for Economic Justice (IEJ). This 'paper profits' account had grown to over R500bn in recent years due to the weakening of the Rand. Treasury considered and ultimately approved a plan to draw down R250bn in total from this account, of which R100bn was allocated to the 2024/25 budget. Whilst not without risks, most observers agree that is a good decision given our current fiscal woes. Many key portfolios will already see their budgets shrink in real terms over the next couple of years, and this situation would have been even worse had it not been for the GFECRA injection. However, it must be stressed that this GFECRA transfer is a once-off and provides no permanent solution to the underlying issues that will continue to constrain our fiscus.
3. Debt servicing costs: Despite the GFECRA 'bailout', South Africa's debt to GDP ratio continues to edge high – towards 75%. Interest payments on this debt will increase beyond R400bn in the next financial year. With nearly 20% of our total budget expenditure soon to be allocated to these debt servicing costs; the opportunity costs are becoming all too real for many citizens. The high cost of borrowing South Africa faces due to a series of institutional failures that resulted in credit rating downgrades and our greylisting must be addressed as a matter of urgency.
4. Macroeconomic projections: Not a direct budget item, but key to all the numbers we see, are the macroeconomic projections over the 3-year medium-term expenditure framework. Whilst only hindsight can judge the current set of projections, it is worth noting that over the last 10-15 years, our actual economic performance has, almost without exception, underperformed relative to projections in the budget from the Treasury. As many of the fundamental underlying issues causing these poor performances continue to hamper our growth today, it seems like some unexpected, good news will be needed to hit even these modest growth targets.      

When evaluating the Budget Speech within the context of South Africa's socio-economic landscape, it is important to recognise the limits of the Treasury's mandate and what they can ultimately do to solve our many and multifaceted problems. Despite the ongoing efforts of Operation Vulindlela – a joint initiative of the Presidency and National Treasury to accelerate the implementation of structural reforms and support economic recovery – Treasury cannot just wave a wand to fix Transnet or Eskom, or magically create millions of sustainable jobs. It can help, it can facilitate, but it cannot do everything, and nor should it.

In summary, even though this Budget Speech is unlikely to appease any lobby groups on the left or right, we believe this is a good budget given the constrained environment. Treasury had to make some tough decisions on reducing support for temporary support programmes such as the Presidential Employment Scheme, which is unfortunate. However, our economy must transition and eventually learn to function in a manner compatible with fiscal sustainability. Encouraging increased private sector participation alongside government is key. The budget seems to recognise this point, although much more needs to be done, not just from the Treasury's side, but from the government in general. The correct systems must be put in place to ensure not just a good allocation of resources on paper, but a supportive regulatory environment, efficiency in delivery, monitoring and evaluation of projects, and accountability. The quality of life for all South Africans depends on this. 

Prof Heinrich Bohlmann is an Associate Professor in the Department of Economics at the University of Pretoria and Dr Jessika Bohlmann is a Research Specialist in the Faculty of Economic and Management Sciences.

Disclaimer: The opinions expressed in this article are solely those of the author and do not necessarily reflect the views of the University of Pretoria.