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South Africa faces significant budgetary challenges amid sluggish economic growth

Ayer 13:50

South Africa is grappling with a substantial budgetary challenge in a climate of slow economic growth, as highlighted by economic experts during a recent conference in Johannesburg focused on commodities.

According to analysts, this year's budget has experienced a slight short-term budgetary slip, marked by weakened projections for the debt-to-GDP ratio and rising budget deficits. The country’s gross debt is now expected to reach 76.2% of GDP in 2025/26, a rise from last year's projection of 75.5%. Furthermore, the budget deficit for the current year is estimated at 4.6% of GDP, up from earlier forecasts of 4.3%.

Economic expert Cherrylee Samson emphasized that to avert future budget deficits, South Africa must prioritize reviving economic growth, cutting expenditures, and enhancing revenue collection. "The truth is that South Africa needs to address structural issues such as corruption and inefficiency in state-owned enterprises to avoid falling into the same trap," she stated.

Ann Bernstein, executive director of the Centre for Development and Enterprise, pointed out that South Africa's challenges are formidable, with GDP growth projected at a mere 0.6% in 2024, a medium-term deficit of $10 billion (190 billion rand), and a debt-to-GDP ratio exceeding 75%.

Wynand Gouws, a wealth manager at Gradidge-Mahura Investments, noted that the budget proposal presented this week in Parliament contained no major surprises, reaffirming that taxpayers will experience significant financial pressure. "The cost of living challenge faced by South Africans will be exacerbated by additional taxes, whether direct or indirect," he highlighted.

Analysts believe that South Africa must fundamentally reassess its political and economic priorities, which could lead to a positive shift in the country's current economic trajectory, characterized by an average growth rate of barely 0.7% over the past decade.

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