Medium-term budget: Focus on cost cutting as state spending surges

South Africa is both spending more than it was last year and taking in less in taxes, leaving Finance Minister Enoch Godongwana no choice but to try to curb expenditure and find more money in his Medium-Term Budget Policy Statement (MTBPS).

Former finance ministers have tried and failed to do the same. But Godongwana is in a corner. Fiscal year-to-date government spending hit R1.04 trillion by September - almost R100 billion more than a year ago, according to data from National Treasury. There’s also the fact that year-to-date expenditure exceeded revenue by more than R250 billion.

"South Africa will need to see a curb on expenditure and higher revenues for the rest of the 2023/24 fiscal year to achieve its fiscal estimates, and markets are wary that in a low growth environment with high, and rising, bond yields this becomes more difficult. The MTBPS will be scrutinised for cost-saving measures," Annabel Bishop, chief economist at Investec, said in a note.